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  • Accident

    Accident

    an unexpected event or circumstance without deliberate intent.

    Accidental Bodily Injury

    Accidental Bodily Injury

    unexpected injury to a person.

    Accidental Death & Dismemberment

    Accidental Death & Dismemberment

    an insurance contract that pays a stated benefit in the event of death and/or dismemberment caused by accident or specified kinds of accidents.

    Adjuster

    Adjuster

    a person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.

    Admission

    Admission

    hospital inpatient care for any medical condition.

    Advance Premiums

    Advance Premiums

    occur when a policy has been processed, and the premium has been paid prior to the effective date. These are a liability to the company and not included in written premium or the unearned premium reserve.

    Agent

    Agent

    an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

    Aggregate

    Aggregate

    the maximum dollar amount or total amount of coverage payable for a single loss, or multiple losses, during a policy period, or on a single project.

    ALAE

    ALAE

    an estimate of the claims settlement associated with a particular claim or claims.

    Annual Statement

    Annual Statement

    an annual report required to be filed with each state in which an insurer does business. This report provides a snapshot of the financial condition of a company and significant events which occurred throughout the reporting year.

    Arbitration

    Arbitration

    a binding dispute resolution tactic whereby a conciliator with no interest in the outcome intercedes.

    Assumed Reinsurance

    Assumed Reinsurance

    the assumption of risk from another insurance entity within a reinsurance agreement or treaty.

    Authorized Company

    Authorized Company

    an insurer licensed or admitted to do business in a particular state.

    Beneficiary

    Beneficiary

    an individual who may become eligible to receive payment due to will, life insurance policy, retirement plan, annuity, trust, or other contract.

    Benefits (Medical & Hospital Expenses)

    Benefits (Medical & Hospital Expenses)

    total expenditures for health care services paid to or on behalf of a member.

    Bodily Injury

    Bodily Injury

    physical injury including sickness or disease to a person.

    Broker

    Broker

    an individual who receives commissions from the sale and service of insurance policies. These individuals work on behalf of the customer and are not restricted to selling policies for a specific company but commissions are paid by the company with which the sale was made.
  • Calendar Year Deductible

    Calendar Year Deductible

    in health insurance, the amount that must be paid by the insured during a calendar year before the insurer becomes responsible for further loss costs.

    Capital and Surplus

    Capital and Surplus

    a company's assets minus its liabilities.

    Chartered Property Casualty Underwriter (CPCU)

    Chartered Property Casualty Underwriter (CPCU)

    a professional designation awarded by the American Institute of Property and Casualty Underwriters to persons in the property and liability insurance field who pass a series of exams in insurance, risk management, economics, finance, management, accounting, and law. Designates must also have at least three years experience in the insurance business or related field.

    Claim

    Claim

    a request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.

    Claims Adjustment Expenses

    Claims Adjustment Expenses

    costs expected to be incurred in connection with the adjustment and recording of accident and health, auto medical and workers' compensation claims.

    Claims-made Form

    Claims-made Form

    A type of liability insurance form that only pays if the both event that causes (triggers)the claim and the actual claim are submitted to the insurance company during the policy term.

    Combined Ratio

    Combined Ratio

    an indication of the profitability of an insurance company, calculated by adding the loss and expense ratios.

    Commencement Date

    Commencement Date

    date when the organization first became obligated for any insurance risk via the issuance of policies and/or entering into a reinsurance agreement. Same as "effective date" of coverage.

    Commission

    Commission

    a percentage of premium paid to agents by insurance companies for the sale of policies.

    Conditions

    Conditions

    requirements specified in the insurance contract that must be upheld by the insured to qualify for indemnification.

    Contractual Liability

    Contractual Liability

    liability coverage of an insured who has assumed the legal liability of another party by written or oral contract. Includes a contractual liability policy providing coverage for all obligations and liabilities incurred by a service contract provider under the terms of service contracts issued by the provider.

    Date of Issue

    Date of Issue

    date when an insurance company issues a policy.

    Declarations

    Declarations

    policy statements regarding the applicant and property covered such as demographic and occupational information, property specifications and expected mileage per year.

    Direct Written Premium

    Direct Written Premium

    total premiums received by an insurance company without any adjustments for the ceding of any portion of these premiums to the Reinsurer.

    Earned Premium

    Earned Premium

    portion of insured's prepaid premium allocated to the insurance company's loss experience, expenses, and profit year-to-date.

    Effective Date

    Effective Date

    date at which an insurance policy goes into force.

    Employers Liability

    Employers Liability

    employers' liability coverage for the legal liability of employers arising out of injuries to employees. This code should be used when coverage is issued as an endorsement, or as part of a statutory workers' compensation policy.

    Endorsement

    Endorsement

    an amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.

    Environmental Pollution Liability

    Environmental Pollution Liability

    liability coverage of an insured to persons who have incurred bodily injury or property damage from acids, fumes, smoke, toxic chemicals, waste materials or other pollutants.

    Excess of Loss Reinsurance

    Excess of Loss Reinsurance

    loss sharing mechanism where an insurer pays all claims up to a specified amount and a reinsurance company pays any claims in excess of stated amount.

    Expense Ratio

    Expense Ratio

    percentage of premium income used to attain and service policies. Derived by subtracting related expenses from incurred losses and dividing by written premiums.

    Exposure

    Exposure

    risk of possible loss.
  • Facultative Reinsurance

    Facultative Reinsurance

    reinsurance for a specific policy for which terms can be negotiated by the original insurer and reinsurer.

    FAIR Plan - Fair Access to Insurance Requirements

    FAIR Plan - Fair Access to Insurance Requirements

    state pools designed to provide insurance to property owners who are unable to obtain property insurance through conventional means.

    Financial Reporting

    Financial Reporting

    insurance companies are required to maintain records and file annual and quarterly financial statements with regulators in accordance with statutory accounting principles (SAP). Statutory rules also govern how insurers should establish reserves for invested assets and claims and the conditions under which they can claim credit for reinsurance ceded.

    Financial Statement

    Financial Statement

    balance sheet and profit and loss statement of an insurance company. This statement is used by the NAIC, and by State Insurance Commissioners to regulate an insurance company according to reserve requirements, assets, and other liabilities.

    Foreign Insurer

    Foreign Insurer

    an insurance company selling policies in a state other than the state in which they are incorporated or domiciled.

    Fronting

    Fronting

    an arrangement in which a primary insurer acts as the insurer of record by issuing a policy, but then passes the entire risk to a reinsurer in exchange for a commission. Often, the fronting insurer is licensed to do business in a state or country where the risk is located, but the reinsurer is not.

    Gross Premium

    Gross Premium

    the net premium for insurance plus commissions, operating and miscellaneous commissions. For life insurance, this is the premium including dividends.

    Hard Market

    Hard Market

    a market characterized by high demand and low supply.

    Hazard

    Hazard

    circumstance which tends to increase the probability or severity of a loss.

    Hold-Harmless Agreement

    Hold-Harmless Agreement

    A risk transfer mechanism whereby one party assumes the liability of another party by contract.
  • Incurred But Not Reported (IBNR)

    Incurred But Not Reported (IBNR)

    (Pure IBNR) claims that have occurred but the insurer has not been notified of them at the reporting date. Estimates are established to book these claims. May include losses that have been reported to the reporting entity but have not yet been entered into the claims system or bulk provisions. Bulk provisions are reserves included with other IBNR reserves to reflect deficiencies in known case reserves. IBNR can sometimes include estimates of incurred but Not Enough Reported (IBNER).

    Incurred Claims

    Incurred Claims

    paid claims plus amounts held in reserve for those that have been incurred but not yet paid.

    Incurred Losses

    Incurred Losses

    sustained losses, paid or not, during a specified time period. Incurred losses are typically found by combining losses paid during the period plus unpaid losses sustained during the time period minus outstanding losses at the beginning of the period incurred in the previous period.

    Indemnity, Principle of

    Indemnity, Principle of

    a general legal principle related to insurance that holds that the individual recovering under an insurance policy should be restored to the approximate financial position he or she was in prior to the loss. Legal principle limiting compensation for damages be equivalent to the losses incurred.

    Insurance

    Insurance

    an economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.

    Insured

    Insured

    party(ies) covered by an insurance policy.

    Insurer

    Insurer

    an insurer or reinsurer authorized to write property and/or casualty insurance under the laws of any state.

    Intermediary

    Intermediary

    a person, corporation or other business entity (not licensed as a medical provider) that arranges, by contracts with physicians and other licensed medical providers, to deliver health services for a health insurer and its enrollees via a separate contract between the intermediary and the insurer.

    Internet Liability Insurance/Cyber Insurance

    Internet Liability Insurance/Cyber Insurance

    coverage for cyber commerce including copyright infringement, libel, and violation of privacy.

    Joint Underwriting Association (JUA)

    Joint Underwriting Association (JUA)

    a loss-sharing mechanism combining several insurance companies to provide extra capacity due to type or size of exposure.

    Lapse

    Lapse

    termination of a policy due to failure to pay the required renewal premium.

    Liability

    Liability

    a certain or probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or to provide services to other entities in the future as a result of a past transactions(s) or event(s). three essential characteristics: a) It embodies a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand; b) The duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice; and c) The transaction or other event obligating the entity has already happened.

    Limits

    Limits

    maximum value to be derived from a policy.

    Line of Business

    Line of Business

    classification of business written by insurers.

    Loss

    Loss

    physical damage to property or bodily injury, Including loss of use or loss of income.

    Loss Adjustment Expense (LAE)

    Loss Adjustment Expense (LAE)

    expected payments for costs to be incurred in connection with the adjustment and recording of losses. Can be classified into two broad categories: Defense and Cost Containment (DCC) and Adjusting and Other (AO). Can also be separated into (Allocated Loss Adjustment Expense) and (Unallocated Loss Adjustment Expense for ratemaking purposes.

    Loss Frequency

    Loss Frequency

    incidence of claims on a policy during a premium period.

    Loss Ratio

    Loss Ratio

    the percentage of incurred losses to earned premiums.

    Loss Reserve

    Loss Reserve

    the amount that insurers set aside to cover claims incurred but not yet paid.

    Losses Incurred

    Losses Incurred

    Includes claims that have been paid and/or have amounts held in reserve for future payment.

    Losses Incurred But Not Reported (IBNR)

    Losses Incurred But Not Reported (IBNR)

    An estimated amount set aside by the insurance company to pay claims that may have occurred, but for some reason have not yet been reported to the insurance company.
  • Malpractice

    Malpractice

    alleged misconduct or negligence in a professional act resulting in loss or injury.

    Medical Malpractice

    Medical Malpractice

    insurance coverage protecting a licensed health care provider or health care facility against legal liability resulting from the death or injury of any person due to the insured's misconduct, negligence, or incompetence, in rendering or failure to render professional services.

    Medical Professional Liability

    Medical Professional Liability

    insurance coverage protecting a licensed health care provider or health care facility against legal liability resulting from the death or injury of any person due to the insured's misconduct, negligence, or incompetence in rendering professional services. Medical Professional Liability is also known as Medical Malpractice.

    Named Insured

    Named Insured

    the individual defined as the insured in the policy contract.

    Named Peril Coverage

    Named Peril Coverage

    insurance for losses explicitly defined in the policy contract.

    National Association of Insurance Commissioners (NAIC)

    National Association of Insurance Commissioners (NAIC)

    the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.

    Negligence

    Negligence

    failure to exercise reasonable consideration resulting in loss or damage to oneself or others.

    Net Premiums Earned

    Net Premiums Earned

    premiums on property/casualty or health policies that will not have to be returned to the policyholder if the policy is cancelled.

    NFIP - National Flood Insurance Program

    NFIP - National Flood Insurance Program

    flood insurance and floodplain management for personal and business property administered under the National Flood Act of 1968. Encourages participation by private insurers through a flood insurance pool.

    Nonadmitted Insurer

    Nonadmitted Insurer

    insurance company not licensed to do business within a given state.

    Occurrence

    Occurrence

    an accident , including injurious exposure to conditions, which results, during the policy period in bodily injury or property damage neither expected or intended from the standpoint of the insured. (Bickelhaupt and Magee)

    Officer

    Officer

    a president, vice-president, treasurer, actuary, secretary, controller and any other person who performs for the company functions corresponding to those performed by the foregoing officers.

    Par Value

    Par Value

    the nominal or face value of a stock or bond.

    Policy

    Policy

    a written contract ratifying the legality of an insurance agreement.

    Policy Period

    Policy Period

    time period during which insurance coverage is in effect.

    Premium

    Premium

    Money charged for the insurance coverage reflecting expectation of loss.

    Premiums Earned

    Premiums Earned

    the portion of premium for which the policy protection or coverage has already been given during the now-expired portion of the policy term.

    Premiums Net

    Premiums Net

    is the amount calculated on the basis of the interest and mortality table used to calculate the reporting entity's statutory policy reserves.

    Premiums Written

    Premiums Written

    total premiums generated from all policies (contracts) written by an insurer within a given period of time.

    Primary Insurance

    Primary Insurance

    coverage that takes precedence when more than one policy covers the same loss.

    Prior Approval Law

    Prior Approval Law

    a state regulatory requirement for pre-approval of all insurance rates and forms.

    Private Passenger Auto (PPA)

    Private Passenger Auto (PPA)

    filings that include singularly or in any combination coverage such as the following: Auto Liability, Personal Injury Protection (PIP), Medical Payments (MP), Uninsured/Underinsured (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.

    Producer

    Producer

    an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

    Provisions

    Provisions

    contingencies outlined in an insurance policy.

    Proximate Cause

    Proximate Cause

    event covered under insured's policy agreement.
  • Rate

    Rate

    value of insured losses expressed as a cost per unit of insurance.

    Reinsurance

    Reinsurance

    a transaction between a primary insurer and another licensed (re) insurer where the reinsurer agrees to cover all or part of the losses and/or loss adjustment expenses of the primary insurer. The assumption is in exchange for a premium. Indemnification is on a proportional or non-proportional basis.

    Reinsurer

    Reinsurer

    company assuming reinsurance risk.

    Reported Losses

    Reported Losses

    Includes both expected payments for losses relating to insured events that have occurred and have been reported to the insurance company, but not yet paid.

    Reserve

    Reserve

    A portion of the premium retained to pay future claims.

    Rider

    Rider

    an amendment to a policy agreement.

    Risk

    Risk

    Uncertainty concerning the possibility of loss by a peril for which insurance is pursued.

    Risk Retention Act

    Risk Retention Act

    a 1986 federal statute amending portions of the Product Liability Risk Retention Act of 1981 and enacted to make organization of Risk Retention Groups and Purchasing Groups more efficient.

    Risk Retention Group

    Risk Retention Group

    group-owned insurer organized for the purpose of assuming and spreading the liability risks to its members.

    Soft Market

    Soft Market

    a buyer's market characterized by abundant supply of insurance driving premiums down.

    State of Domicile

    State of Domicile

    the state where a company's home office is located.

    Subrogation

    Subrogation

    situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party.

    Subrogation Clause

    Subrogation Clause

    section of insurance policies giving an insurer the right to take legal action against a third party responsible for a loss to an insured for which a claim has been paid.

    Surplus

    Surplus

    insurance term referring to retained earnings.

    Term

    Term

    period of time for which policy is in effect.
  • Unallocated Loss Adjustment Expense (ULAE)

    Unallocated Loss Adjustment Expense (ULAE)

    loss adjustment expenses that cannot be specifically tied to a claim.

    Underwriter

    Underwriter

    person who identifies, examines and classifies the degree of risk represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate.

    Underwriting

    Underwriting

    the process by which an insurance company examines risk and determines whether the insurer will accept the risk or not, classifies those accepted and determines the appropriate rate for coverage provided.

    Underwriting Risk

    Underwriting Risk

    section of the risk-based capital formula calculating requirements for reserves and premiums.

    Unearned Premium

    Unearned Premium

    amount of premium for which payment has been made by the policyholder but coverage has not yet been provided.

    Unpaid Losses

    Unpaid Losses

    claims that are in the course of settlement. The term may also include claims that have been incurred but not reported.

    Written Premium

    Written Premium

    the contractually determined amount charged by the reporting entity to the policyholder for the effective period of the contract based on the expectation of risk, policy benefits, and expenses associated with the coverage provided by the terms of the insurance contract.