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Glossary - Insurance
Glossary
" 1 4 5 A B C D E F G H I J K L M N O P Q R S T U V W Z ["-Z]
Word Definition
"Any Willing Provider Laws:" "Any Willing Provider Laws:" Legislation that requires managed care plans to accept into their networks any provider willing to agree to the network's terms and conditions.
"Bed Pan" Mutuals "Bed Pan" Mutuals: Small mutual insurance companies, usually operating within a single geographic region, that underwrite medical malpractice insurance.
"Follow the Fortunes" Clause "Follow the Fortunes" Clause: A clause often contained in a reinsurance treaty under which the reinsurer agrees to cover all losses within the terms of the underlying policy, thereby following the fortunes of the cedant.
"Fresh Start" "Fresh Start": A special provision of the Tax Reform Act of 1986 allowing for a phase-in of discounting of loss reserves.
"Long-Tail" Business "Long-Tail" Business: A class of business in which claims take a long period of time to occur or be settled.
"No Fault" Insurance "No Fault" Insurance: A system in which an injured person receives benefits from an insurer without having to establish fault.
"Play or Pay" Programs "Play or Pay" Programs: In the field of health insurance, "play or pay" programs refer to legislative initiatives that would require employers either to provide minimum levels of health insurance to their employees or be taxed to fund publicly supported alternatives.
"Short-Tail" Business "Short-Tail" Business: A class of business in which claims are reported and settled in a relatively short period of time.
"Stress and Strain" Claims "Stress and Strain" Claims: Workers' compensation claims relating to injuries or illnesses arising out of psychological pressures in the workplace. Stress and strain claims recently have emerged as a particularly troubling category of claims in California.
"Three-Legged Stool" "Three-Legged Stool": An historical ideal "model" of retirement income, under which people ultimately would rely on a combination of personal savings, Social Security and an employer-sponsored pension plan to fund their retirement.
"Time and Distance" Cover "Time and Distance" Cover: A form of reinsurance policy that provides the cedant with guaranteed payments. The payment schedule is dependent upon investment yields and not upon traditional risk criteria. See Financial Reinsurance.
"Write Your Own" Flood Insurance "Write Your Own" Flood Insurance: See National Flood Insurance Program.
12(b)-1 Fee 12(b)-1 Fee: A fee charged by mutual funds to cover promotional expenses, including advertising and commissions, or to pay custodian and service fees to insurers, brokerage houses, etc.
401(k) Plan 401(k) Plan: A tax-qualified defined contribution retirement plan offered by a corporation and funded by employees' pretax contributions. Typically permits employees to defer a limited amount of their pretax salary into any of several diversified investment options. Investments build up tax-free until distributed, and corporate sponsors often match part or all of employees' contributions with tax-deductible corporate contributions. See also Keogh Plan.
403(b) Plan 403(b) Plan: A voluntary "quasi-group" tax-qualified plan generally sold on a payroll deduction basis to teachers, government employees and employees of hospitals and nonprofit organizations, and often viewed as an alternative to 401(k) plans. Premiums paid by such organizations on an annuity contract for an employee are not taxable and, like other annuities, the inside build-up is tax-deferred. Also referred to as Tax-Qualified Annuities (TQAs) or Tax-Sheltered Annuities (TSAs).
404 (c ) 404 (c ): The section of the ERISA code, clarified by Department of Labor regulations, that describes employers' (and other plan fiduciaries') role and ultimate potential liability for employees' inappropriate investment decisions under defined contribution plans, and the conditions under which employers may be relieved of liability.
457 Plan 457 Plan: A tax-qualified deferred compensation retirement plan offered to employees by state or local governments, municipalities and organizations that obtain their funding from government sources.
50/50 Rule 50/50 Rule: Federal regulation requiring that MCO plans maintain commercial membership at least equal to their Medicare enrollment.
Absence Management Absence Management: A program to control absences due to disability with an emphasis on controlling unexplained or excessive absenteeism. Programs with a broader focus (i.e. not limited to disability-related absence) are often referred to as "total absence management".
Absolute Liability Absolute Liability: The principle that a person may be held liable for damages even without a finding of fault or negligence.
Access Access: A patient's ability to obtain medical care. The ease of access is determined by such components as the availability of medical services and their acceptability to the patient, the location of health care facilities, transportation, hours of operation and cost of care.
Accident Accident: An unforeseen and unintended event or occurrence.
Accident and Health Insurance Accident and Health Insurance: A form of insurance covering death or personal injury by accident, as well as sickness or bodily injury.
Accident Year Accident Year: The twelve-month period during which losses occurred, regardless of when they are reported.
Accidental Death Benefit Accidental Death Benefit: See Double Indemnity.
Accord and Satisfaction Accord and Satisfaction: A method of settling a claim in which the parties to the dispute agree to accept something different than was originally expected. The accord is the substituted agreement, and the satisfaction is the performance of the new agreement.
Accumulation Period Accumulation Period: The period of time during which an insured must incur medical expenses up to the deductible in order to become eligible for reimbursement under a comprehensive major medical or major medical insurance policy. See Comprehensive Major Medical Insurance and Major Medical Insurance.
Acquisition Costs Acquisition Costs: See Policy Acquisition Costs.
Act of God Act of God: An event that occurs without human intervention or culpability. It serves as a defense to tort liability.
Actuarial Opinion Actuarial Opinion: The certification by an actuary as to the reasonableness of an insurer's reserves.
Actuary Actuary: A person who uses mathematical analysis of past loss data and other statistics to determine rates and estimate an insurer's future liabilities.
Acute Care Acute Care: A pattern of health care in which a patient is treated for an acute (immediate and severe) episode of illness, for the subsequent treatment of injuries related to an accident or other trauma, or during recovery from surgery. Acute care usually is given in a hospital by specialized personnel using complex and sophisticated technical equipment and materials. Unlike chronic care, acute care often is necessary for only a short time.
Additional Named Insured Additional Named Insured: One or more insureds, in addition to the principal named insured, referred to in an insurance policy as one enjoying protection under the policy.
Add-on Tax Add-on Tax: The additional amount of federal income tax payable by mutual life insurers due to the disallowance as a deduction of a portion of policyholder dividends.
Adjuster Adjuster: See Claim Adjuster.
Administration Expense Administration Expense: All the costs incurred by an insurer in the conduct of its business other than policy acquisition costs, loss adjustment expenses and investment expenses.
Administrative Cost Administrative Cost: Costs related to utilization review, insurance marketing, medical underwriting, agents' commissions, premium collection, claims processing, insurer profit, quality assurance programs and risk management. Administrative Services Only (ASO): A fee-based program in which an insurance company or other third-party administrator performs administrative, clerical or managerial services only and does not assume any risk. Services usually include claims processing, but also may include other services, such as actuarial analysis, utilization review, etc. Businesses or self-funded health plans may use an ASO
Admitted Assets Admitted Assets: Assets of an insurer permitted by insurance regulatory authorities to be taken into account in determining the insurer's financial condition under statutory accounting practices.
Admitted Insurer Admitted Insurer: An insurer licensed to write certain types of insurance within a given state; also known as an authorized insurer.
Admitted Paper Admitted Paper: Policies issued by an admitted insurer.
Adverse Selection Adverse Selection: The process by which an insurer is left with a disproportionate share of unwanted, higher-risk business. Particularly common in the life and health lines, adverse selection can occur when higher-than-expected claims experience leads an insurer to raise rates, which in turn causes the migration of "good" risks to companies charging less. Adverse selection may be attributable to improper underwriting and risk selection by the insurer or by superior knowledge of the risk by the insured. Among applicants for a given group or individual program, the tendency for those with an impaired health status, or who are prone to higher-than-average utilization of benefits, to be enrolled in disproportionate numbers and lower deductible plans.
Affinity Group Affinity Group: Purchasers of goods and services, including insurance, with common characteristics.
Agency Plant Agency Plant: An insurer's sales organization.
Agent Agent: A person who solicits insurance on behalf of an insurer.
Agents' Balances Agents' Balances: An insurer's written premiums minus commissions due and payable; also known as collected premiums.
Aggregate Deductible Aggregate Deductible: The aggregate losses occurring within a given policy period that must be exceeded before an insurer becomes liable for losses.
Aggregate Limits of Liability Aggregate Limits of Liability: The maximum amount payable by an insurer upon all claims arising within a single policy period.
Aid to Families with Dependent Children (AFDC) Aid to Families with Dependent Children (AFDC): A federal cash assistance entitlement program; states are required to cover its beneficiaries under Medicaid.
ALAE ALAE: See Loss Adjustment Expense.
Alien Insurer Alien Insurer: An insurer domiciled outside the United States that transacts business within the United States.
Alliance of American Insurers Alliance of American Insurers: A Downers Grove, Illinois-based trade organization representing primarily the smaller property-casualty insurers.
Allied Lines Allied Lines: A form of insurance coverage, often written in conjunction with fire insurance, covering perils not included in the basic policy. Includes data processing insurance, demolition insurance, earthquake insurance, increased cost of construction clause, radioactive contamination insurance, sprinkler leakage insurance, standing timber insurance, vandalism and malicious mischief insurance and water damage insurance. Earthquake insurance can be sold as a separate line, and data on earthquake insurance are tracked separately from allied lines in the annual statutory statement.
Allocated Claim or Loss Adjustment Expense Allocated Claim or Loss Adjustment Expense: Expenses directly related to a particular claim, including claims investigation and legal expenses, but excluding loss payments.
All-Risk Insurance All-Risk Insurance: Insurance in which coverage is not limited to specific events or named perils.
Alphabet Houses Alphabet Houses: A small number of national insurance brokerage organizations usually referred to by their initials. For example, Alexander and Alexander was known as "A&A".
Alternative Delivery Systems Alternative Delivery Systems: Health care providers other than acute-care hospitals, e.g., neighborhood clinics, treatment centers and visiting nurses.
Alternative Market Alternative Market: Self-insurers, captive insurers and risk retention groups. These entities provide insurance protection in competition with traditional insurance companies.
Alternative Minimum Tax (AMT) Alternative Minimum Tax (AMT): This term is used to refer to the federal income tax liability of insurers, without regard to whether the insurer has taxable income using standard calculations.
Ambulatory Care Ambulatory Care: Medical services provided on an outpatient basis.
American Association of Managing General Agents (AAMGA) American Association of Managing General Agents (AAMGA): A Kansas City, Missouri-based trade organization representing managing general agents.
American Council of Life Insurance (ACLI) American Council of Life Insurance (ACLI): A Washington, DC-based trade organization representing primarily the larger life insurers.
American Insurance Association (AIA) American Insurance Association (AIA): A Washington, DC-based trade organization representing primarily the larger property-casualty insurers.
American Lloyd's American Lloyd's: Associations of individual underwriters permitted to operate within a limited number of states within the United States. These associations have no legal or other relationship with Lloyd's of London. American Trust Fund. See Lloyd's American Trust Fund.
AMT AMT: See Alternative Minimum Tax.
Ancillary Management Ancillary Management: Medical management of such services as pharmacy programs, mental health, EAP and dental care. Larger HMOs tend to keep ancillary services in-house, while smaller ones typically contract with third parties. Anniversary Date. The anniversary of a policy's effective date.
Annual Statement Annual Statement: A report of an insurer's financial operations filed annually with the insurance regulatory authorities of each jurisdiction in which the insurer is licensed to transact business. The report includes a balance sheet, as well as detailed schedules and exhibits. Also known as a convention blank or statement, statutory statement, yellow book (for property-casualty insurers) and blue book (for life insurance). For a more detailed discussion of theprovisions of the annual statement, see Chapter 10.
Annuitant Annuitant: A person who receives payment pursuant to an annuity contract.
Annuity Annuity: A contract that provides for a fixed or variable periodic payment to a person (the annuitant), made from a stated or contingent date and continued for a specified period, such as for a number of years or for life. An annuity may be bought by means of installments, or it may be bought by means of a single lump sum payment. Anti-Managed Care Laws. Legislation designed to prohibit or restrict the business activities of managed care plans, or that undermines the principles of managed care
Appeal Bond Appeal Bond: A form of surety bond that guarantees to the court that the party against whom a judgment was rendered will pay the judgment if the appeal fails.
Appurtenant Structure Appurtenant Structure: A building or other structure on the same premises as the primary structure that also is insured under a property or homeowners insurance policy.
Arbitration Arbitration: A procedure to resolve a dispute between two parties without resorting to litigation.
Arbitration Clause Arbitration Clause: A provision in a contract in which the parties agree to arbitrate disputes. Most contracts between insurers and reinsurers contain an arbitration clause.
ASO ASO: See Administrative Services Only.
Assessable Mutual Insurer Assessable Mutual Insurer: A mutual insurance company that may assess additional premiums from its insureds in the event losses exceed expectations.
Assessment Assessment: This term refers to (1) an additional payment that may be required of policyholders of an assessable mutual insurer in the event losses exceed expectations and (2) a charge levied upon insurers by state guaranty funds or other regulatory authorities.
Asset Valuation Reserve (AVR) Asset Valuation Reserve (AVR): A reserve adopted in interim form by the National Association of Insurance Commissioners in December, 1991, to replace the Mandatory Securities Valuation Reserve (MSVR). AVR was established as a liability on life insurance statutory financial statements beginning in 1992. Life insurers are required to establish statutory reserves for mortgage loans, equity, real estate and joint ventures, as well as for those investments (fixed maturities and equity) previously subject to MSVR. AVR captures all unrealized, as well as realized, gains and losses on such assets.
Asset-Liability Matching Asset-Liability Matching: An investment strategy particularly appropriate for insurers in which the asset manager attempts to match the maturities of fixed-income securities to the schedule of claims and other payments anticipated by the insurer.
Assigned Risk Assigned Risk: An insured whose insurance is provided through an assigned risk pool or plan. Assigned Risk Pool or Plan. A program for providing automobile insurance to high-risk drivers who cannot obtain insurance in the voluntary markets.
Association Plans Association Plans: Group annuity contracts marketed to independent businesses affiliated with professional and trade associations.
Assume Assume: The act of accepting a risk from a cedant in consideration of payment of a premium.
Assumed Premiums Assumed Premiums: Refers primarily to premiums arising from reinsurance policies issued by an insurer or reinsurer. Also may refer to premiums accepted by an individual company under a pooling arrangement.
Assumption of Risk Doctrine Assumption of Risk Doctrine: A legal doctrine that provides a defense for a claim of negligence based upon the plaintiffs knowledge and voluntary assumption of risk associated with a particular activity.
Assumption Reinsurance Assumption Reinsurance: A transaction in which one insurer transfers its liabilities under existing or in-force contracts to an assuming insurer. The transfer is intended to extinguish the assignor's liabilities under the contracts being assigned.
Assurance Assurance: A synonym for insurance.
Attachment Point Attachment Point: The level above which insurance or reinsurance becomes applicable.
Attractive Nuisance Doctrine Attractive Nuisance Doctrine: A legal doctrine that recognizes that certain conditions can attract and cause injury to children. Upon such a finding, the owner of such property can be held liable for resulting injuries. Audit Premiums. Premiums developed from an audit of an insured's records. Audit premiums are generated in workers' compensation and other lines of insurance where premiums are based on payroll and other data relating to actual exposures.
Authorized Insurer Authorized Insurer: See Admitted Insurer.
Authorized Reinsurance Authorized Reinsurance: Reinsurance provided by a reinsurer recognized by a particular state regulator.
Automatic Reinstatement Automatic Reinstatement: A policy provision that provides for automatic reinstatement of a policy following payment of a loss.
Automatic Treaty Automatic Treaty: See Treaty Reinsurance.
Automobile Insurance Automobile Insurance: A form of insurance that provides protection against liability for bodily injury and property damage arising from automobile accidents, as well as protection against loss from damage to automobiles owned by the insured.
Automobile Insurance Plan Automobile Insurance Plan: See Assigned Risk Pool or Plan.
Aviation Insurance Aviation Insurance: A form of insurance that provides liability and physical damage protection for aircraft and their contents.
AVR AVR: See Asset Valuation Reserve.
Baby Boom Generation, or Baby Boomers Baby Boom Generation, or Baby Boomers: The large group of 76 million Americans born between 1946 and 1964.
Bad Faith Claim Bad Faith Claim: A claim based upon wrongful conduct, usually asserted by an insured against an insurer. Such claims may give rise to punitive damages far in excess of the actual damages suffered by the claimant.
Bail Bond Bail Bond: A form of surety bond furnished by a person seeking release from incarceration. The bail bond guarantees the person's appearance in court and is forfeited if this obligation is breached.
Bank Bank: Within the context of reinsurance, this term is used to refer to the profits earned by a reinsurer during the life of a program. For example, if a reinsurer providing catastrophe reinsurance has earned $100,000 in premiums and incurred no losses, there would exist a $100,000 bank.
Bank Investment Contract (BIC) Bank Investment Contract (BIC): A form of GIC issued only by a bank, these are the primary noninsurance competition for GICs, and are particularly popular for maturities of less than three years.
Basic Limits Basic Limits: The minimum limits of liability that may be purchased by an insured.
Beneficiary Beneficiary: The person named in an insurance policy as the recipient of the proceeds of the policy. Also refers to any person eligible as either a subscriber or a dependent for a managed care service in accordance with a contract.
Best Ratings Best Ratings: Ratings issued by A. M. Best Company, Inc., a company that publishes reports on the financial condition and history of individual insurers and provides ratings on most of the insurers doing business in the United States. See Chapter 13.
BIC BIC: See Bank Investment Contract.
Bid Bond Bid Bond: An instrument provided by the surety guaranteeing that the surety will deliver a contract performance bond if a contractor's bid is accepted.
Binder Binder: Temporary authorization of coverage issued prior to the issuance of an insurance policy.
Blank Blank: See Annual Statement.
Blanket Contract Blanket Contract: A health insurance contract that provides coverage on a group basis, e.g., employees within a business organization.
Blanket Coverage Blanket Coverage: A form of insurance that covers multiple items of property.
Blue Book Blue Book: See Annual Statement.
Blue Cross/Blue Shield Plans Blue Cross/Blue Shield Plans: Nonprofit prepayment plans that provide health insurance coverage for hospital and physicians' services.
Bodily Injury (BI) Liability Insurances Bodily Injury (BI) Liability Insurances: A form of insurance that provides protection against losses resulting from the imposition of a liability claim against an insured for bodily injury to a third party. Bodily injury can include losses of a purely economic nature, such as loss of wages.
Boiler and Machinery Insurance Boiler and Machinery Insurance: A form of insurance that protects an insured from losses resulting from damage to boilers and other machinery.
Bond Bond: See Surety Bond.
Bonding Company Bonding Company: An insurer authorized to issue surety bonds. Book. Refers to an insurer's in-force business. Book. Refers to an insurer's in-force business.
BOP BOP: See Business Owners Policy.
Bordereau Bordereau: A detailed list of premiums and claims prepared periodically by cedants for reinsurers to advise them of risks accepted and claims incurred.
Bornhuetter-Ferguson Method Bornhuetter-Ferguson Method: A reserving technique used by actuaries for estimating a property-casualty insurer's loss liability.
Broad Form Broad Form: A package policy that covers additional perils beyond those in a basic package policy. See Package Policy.
Broker Broker: An intermediary who represents the insured in its dealings with an insurer and/or shops for coverage on behalf of the insured. Also, organizations that sell Lloyd's policies to insureds.
Builders Risk Builders Risk: A form of insurance that indemnifies an insured for damage to a building under construction. Bulk Reinsurance. See Portfolio Transfer.
Bundled Arrangement Bundled Arrangement: A defined contribution plan approach in which a single provider handles all aspects of record-keeping, administration and investments for a plan sponsor. Often, the arrangement will be "pseudo-bundled," offering the services of a record-keeper/administrator and a number of fund managers that have entered into strategic alliances that allow others to offer their products.
Business Interruption Insurance Business Interruption Insurance: A form of insurance that reimburses a business owner for lost profits and certain other losses.
Business Judgment Rule Business Judgment Rule: A legal doctrine that protects directors and officers of a corporation from personal liability for losses arising from a prudent, good faith decision.
Business Life Insurance Business Life Insurance: See Key Man Life Insurance.
Business Owners Policy (BOP) Business Owners Policy (BOP): A package policy designed to meet the insurance requirements of small- to medium-sized businesses.
Cafeteria Plan Cafeteria Plan: An employee benefit plan that permits employees to choose from among a group of life, medical and other benefit plans; also known as a flexible benefit plan.
Calendar Year Calendar Year: A twelve-month period, January through December, when losses are incurred by an insurer, regardless of the effective date of the original policies.
Cancellation Cancellation: Termination of an insurance policy by the insurer or the insured prior to the policy's scheduled expiration date.
Capacity Capacity: The amount of insurance available from a single insurer or from an insurer within a particular market. In Lloyd's, capacity refers to the historical basic unit of measurement within Lloyd's of the level of premium a syndicate is able to underwrite; a function of the capital pledged to support that syndicate by the capital providers.
Capitation Capitation: A payment system whereby managed care plans pay health care providers a fixed, per-capita amount (usually on a monthly basis) to care for a patient over a given period. Providers are not reimbursed for services that exceed the allotted amount. The rate may be fixed for all members or it can be adjusted for the age and gender of the members, based on actuarial projections of medical utilization.
Captive Agent Captive Agent: An insurance agent who has agreed to provide exclusive representation to one insurer. A captive agent usually is an employee of the insurer.
Captive Insurer Captive Insurer: An insurer controlled by an insured or a group of insureds, formed for the purpose of insuring risks associated with the activities of its stockholders or members.
Carrier Carrier: A synonym for insurer.
Carrying Value Carrying Value: The dollar amount allowed by the NAIC Securities Valuation Office for any invested asset included in an insurer's statutory financial statement. Allowable values for different classifications of assets may vary.
Case Management Case Management: The process by which all health-related matters of a case are managed by a physician or nurse or designated health professional. Physician case managers coordinate designated components of health care, such as appropriate referral to consultants, specialists, hospitals, ancillary providers and services. Case management is intended to ensure continuity of services and accessibility to overcome rigidity, fragmented services and the misutilization of facilities and resources. It also attempts to match the appropriate intensity of services with the patient's needs over time, and is a component of utilization management.
Case Reserves Case Reserves: Reserves established with respect to specific reported claims that are intended to reflect the ultimate liability and expense of settling a claim.
Cash Balance Plan Cash Balance Plan: A type of defined benefit plan, sometimes referred to as a hybrid plan because it mimics some of the characteristics of defined contribution plans. Employees receive credits in their own account, based on a percentage of their salary and a credited interest rate, and are provided periodic statements that track their accumulating balance. Although the account is more hypothetical than real, the funds are subject to the same rules as defined benefit plan assets and form part of the company's asset pool.
Cash Flow Underwriting Cash Flow Underwriting: The process of underwriting in which the insurer seeks to compensate for underwriting losses by investment income derived from the cash flow of its premiums.
Cash Surrender Value Cash Surrender Value: The amount of cash available to a policyholder upon surrender of a life insurance policy or annuity contract.
Casualty Actuarial Society (CAS) Casualty Actuarial Society (CAS): An Arlington, Virginia-based professional organization that promotes actuarial science for lines of insurance other than life insurance.
Casualty Catastrophe Cover Casualty Catastrophe Cover: See Clash Reinsurance or Cover.
Casualty Insurance Casualty Insurance: A synonym for liability insurance.
Cat Cover Cat Cover: See Catastrophe Reinsurance.
Catastrophe Catastrophe: A loss or series of losses expected to exceed $25,000,000 in insured property damage. The definition was revised from a $5,000,000 threshhold effective January 1, 1997.
Catastrophe Reinsurance Catastrophe Reinsurance: A form of reinsurance, usually in the form of excess-of-loss reinsurance, that indemnifies the ceding insurer from losses arising from a natural disaster. The actual reinsurance document is referred to as a "catastrophe cover.
CCN CCN: See Community Care Network.
Cedant Cedant: A term for an insurer that has underwritten insurance and transfers all or part of its risk to a third party by purchasing reinsurance; also known as a reinsured.
Cede Cede: The act of purchasing reinsurance.
Ceded Premiums Ceded Premiums: Primarily, refers to premiums paid for reinsurance policies and transferred to the reinsurer. May also refer to premiums transferred by an individual company under a pooling arrangement.
Ceding Commission Ceding Commission: An amount payable by a reinsurer to a cedant to cover its acquisition costs plus an anticipated profit margin.
CERCLA CERCLA: See Comprehensive Environmental Response, Compensation, and Liability Act of 1980.
Certificate of Authority Certificate of Authority: See License.
Certificate of Insurance Certificate of Insurance: A document issued to individuals insured under a group policy setting forth the essential terms of coverage.
Cession Cession: The amount of insurance ceded to a reinsurer.
CGL CGL: See Commercial General Liability Insurance.
Chartered Life Underwriter (CLU) Chartered Life Underwriter (CLU): A person with a minimum of three years of experience in the life and health insurance business who has passed a series of ten professional examinations.
Chartered Property and Casualty Underwriter (CPCU) Chartered Property and Casualty Underwriter (CPCU): A person with a minimum of three years of experience in the property-casualty insurance business who has passed a series of ten professional examinations.
Chronic Care Chronic Care: Long-term care of individuals with longstanding, persistent diseases or conditions. It includes care specific to the problem as well as other measures to encourage self-care, to promote health and to prevent loss of function.
Claim Claim: A demand for payment under an insurance policy for a loss covered by that policy.
Claim Adjuster Claim Adjuster: An individual or firm, whose functions typically include the on-site examination, evaluation and settlement of insurance claims. May be an independent contractor or employee of an insurance company.
Claim Department Claim Department: A unit within an insurance organization responsible for the evaluation and settlement of claims.
Claimant Claimant: One who submits a claim or suffers a loss.
Claims-Made Policy Claims-Made Policy: An insurance policy covering only those claims that occur and are reported during the policy period. In certain instances, a claims-made policy may cover claims arising prior to the policy's inception date. See also Prior Acts Coverage.
Clash Reinsurance or Cover Clash Reinsurance or Cover: A form of reinsurance that indemnifies the ceding insurer for losses affecting multiple policies. Such coverage is designed to protect the cedant from multiple catastrophic losses.
Closed Network HMO Closed Network HMO: An HMO in which all the primary care providers are its employees, i.e., the HMO does not contract with outside providers for primary care.
Closed Panel Closed Panel: Medical services that are delivered in an HMO-owned health center or satellite clinic by physicians who belong to a specially formed, but legally separate, medical group that serves only the HMO. This term usually refers to group or staff HMO models.
CLU CLU: See Chartered Life Underwriter.
CMP CMP: See Commercial Multi-Peril Insurance or see Competitive Medical Plans.
Coinsurance: Coinsurance: This term refers to (1) a relationship between two insurers that agree to share a risk proportionally and (2) those instances in which an insured assumes a portion of the risk.
COLI COLI: See Corporate-Owned Life Insurance.
Collateral Assignment Collateral Assignment: The use of a life insurance policy as collateral for a loan.
Collision Insurance Collision Insurance: A form of insurance that covers damage to an insured's automobile resulting from an accident.
Combined Ratio Combined Ratio: The sum of an insurer's loss ratio, expense ratio and policyholder dividend ratio, which may be determined in accordance with statutory accounting practices or generally accepted accounting principles. A combined ratio under 100% generally indicates an underwriting profit, and a combined ratio over 100% generally indicates an underwriting loss.
Commercial General Liability (CGL) Insurance Commercial General Liability (CGL) Insurance: A form of insurance policy that includes a variety of coverages for liability exposures applicable to businesses. New standard-form policies exclude pollution coverage, although such coverage may be available through endorsement or separate policies. Also known as Comprehensive General Liability Insurance.
Commercial Lines Insurance Commercial Lines Insurance: Insurance that covers commercial and governmental activities.
Commercial Multi-Peril (CMP) Insurance Commercial Multi-Peril (CMP) Insurance: A form of insurance that provides comprehensive protection to businesses, including coverage for property damage from fire, windstorm and certain other perils, for losses from crime, and for liability for personal injury to others.
Commercial Package Policy (CPP) Commercial Package Policy (CPP): A package policy designed to meet the needs of larger, more complex businesses.
Commission Commission: Compensation paid to a producer for originating business; primary insurers also are paid a commission for ceding business to a reinsurer.
Common Law Common Law: Legal principles established by the courts that are used as precedent for deciding future cases. This contrasts with statutory law that is enacted by legislative bodies.
Community Care Network (CCN) Community Care Network (CCN): A health care vehicle that provides coordinated, organized and comprehensive care to a community's population. Hospitals, primary care physicians and specialists link preventive and treatment services through contractual and financial arrangements, producing a network that provides coordinated care with continuous monitoring of quality and accountability to the public. While this term often is used interchangeably with Integrated Delivery System (IDS), the CCN tends to be community-based and nonprofit.
Community Rating Community Rating: The practice of some prepayment plans whereby rates are calculated using a broad range of populations in a community or region. Thus, premiums for subscribers are reasonably uniform and not dependent on individual or group claim experience. This is the rating methodology required of federally qualified HMOs and of HMOs under the laws of many states, and occasionally indemnity plans under certain circumstances. Plans are permitted to factor in differences for age, sex, mix (average contract size) and industry factors; not all factors are necessarily allowed under state laws.
Commute Commute: The process of estimating, paying and discharging an insurer's present and future obligations. Frequently, an insurer and a reinsurer will commute their obligations to each other rather than maintain an ongoing relationship over a number of years.
Company Adjuster Company Adjuster: An adjuster who is an employee of an insurer. See Claim Adjuster.
Comparative Negligence Comparative Negligence: A legal doctrine that enables a claimant to recover damages notwithstanding a finding that the claimant may have a degree of culpability. Damages are apportioned in accordance with degrees of culpability.
Compensatory Damages Compensatory Damages: Damages awarded to a claimant that compensate the claimant for losses sustained and are designed to make the injured party "whole." This contrasts with punitive damages, which are intended not merely to compensate the claimant but to punish the wrongdoer as well.
Competitive Fund Competitive Fund: A state-run workers' compensation insurance facility that competes with private insurers for primary business.
Competitive Medical Plans (CMPs) Competitive Medical Plans (CMPs): A type of Medicare private managed care plan, provided for under TEFRA. See Risk HMO.
Completed Operations Completed Operations: The imposition of liability for faulty construction arising after the work has been completed.
Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA or Superfund) Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA or Superfund): Legislation enacted by the federal government to provide funds to clean up hazardous waste sites. The legislation, which was amended and extended in 1986, also holds certain responsible parties liable for the expenses of cleaning up hazardous waste sites. Through the legislation's "joint and several liability" provisions, insurers have been required to pay for the cost of clean-up in certain instances.
Comprehensive General Liability Insurance Comprehensive General Liability Insurance: See Commercial General Liability Insurance.
Comprehensive Major Medical Insurance Comprehensive Major Medical Insurance: A group health policy that combines basic health care coverage with major medical insurance in a single policy. See Major Medical Insurance.
Compulsory Insurance Compulsory Insurance: Insurance coverage that is required by law, such as automobile liability insurance for drivers or workers' compensation insurance for employers.
Concurrent Causation Concurrent Causation: A legal doctrine that holds that when a property loss may be attributable to multiple causes, the loss shall be covered by insurance as long as one cause is covered by insurance.
Concurrent Review Concurrent Review: Monitoring, under the direction of a medical professional (usually a nurse), of the medical treatment and progress toward recovery once a patient is admitted to a hospital. Its purpose is to assure timely delivery of services and to confirm the necessity of continued inpatient care. This is a component of utilization management.
Condition Condition: A substantive provision of an insurance contract.
Consequential Loss Consequential Loss: A loss resulting from, but not caused directly by, an act. This contrasts with the proximate cause of a loss, which refers to an event that is the direct and immediate cause of a loss.
Contingent Commission Contingent Commission: A supplemental commission payable by an insurer based upon the loss ratio or experience of the business being placed.
Contingent Liability Contingent Liability: A liability that may occur in the future but has not yet occurred.
Contract Performance Bond Contract Performance Bond: A surety bond that guarantees the performance of specific contractual obligations between the principal and the obligee, as well as payments to suppliers of labor and material.
Contractor's License Bond Contractor's License Bond: A surety bond that guarantees the principal will meet the requirements of such licensing laws as may be applicable to contractors.
Contributory Negligence Contributory Negligence: A legal doctrine that precludes recovery for damage if the plaintiff has contributed to the loss.
Contributory Plan Contributory Plan: A group life or health policy in which the beneficiary pays a portion of the premium.
Convention Blank or Statement Convention Blank or Statement: See Annual Statement.
Conversion Annuity Conversion Annuity: A group annuity contract that at one time shared in the payment of dividends as a participating policy but which subsequently was converted to a non-dividend paying, non-participating policy.
Convertible Term Insurance Convertible Term Insurance: Term life insurance that, by its provisions, is convertible to permanent life insurance without evidence of insurability. See Term Life Insurance.
Corporate Name Corporate Name: A new participant in Lloyd's of London, started in 1994, where liability is limited and capital is provided on a corporate basis.
Corporate-Owned Life Insurance (COLO) Corporate-Owned Life Insurance (COLO): A life insurance policy covering an employee, with the corporation owning the policy.
Corporation of Lloyd's Corporation of Lloyd's: Provides administrative support functions for all Lloyd's syndicates, and is paid for by all syndicates.
Cost Containment Cost Containment: Refers to the practice of controlling health care costs through the elimination or reduction of inefficiencies in the health care delivery system.
Cost HMOs Cost HMOs: A type of Medicare private managed care plan, provided for under TEFRA, which is essentially a Point-of-Service plan, except that Medicare bears all risk and pays for out-of-network care.
Cost Shifting Cost Shifting: Charging one group of patients more in order to make up for underpayment by others. Most commonly, charging some privately insured patients more in order to make up for underpayment by Medicaid or Medicare.
Co-Surety Co-Surety: One of two or more sureties participating in a surety bond and sharing liability.
Council of Lloyd's Council of Lloyd's: The 28-member governing body of Lloyd's.
Country Risk Country Risk: See Political Risk Insurance.
Court Bond Court Bond: A surety bond that guarantees that the principal will discharge obligations set by a court.
Cover Note Cover Note: Same as binder; used primarily outside the United States.
Coverage Coverage: The protection provided by an insurance policy.
Covered Participant Covered Participant: A person who meets the eligibility requirements of a pension plan or a group life or health insurance policy and either is receiving or is eligible to receive benefits.
CPCU CPCU: See Chartered Property and Casualty Underwriter.
CPP CPP: See Commercial Package Policy.
Credentialling Credentialling: The process used by managed care companies of reviewing a practitioner's credentials (training, experience or demonstrated ability) for the purpose of determining if criteria for clinical privileging are met, i.e., before admitting the practitioner to the health network.
Credit Enhancement Credit Enhancement: Use of a financial guaranty to upgrade the credit quality of a security. Credit enhancement may be provided through insurance or a letter of credit.
Credit Life Insurance Credit Life Insurance: A form of decreasing term insurance that covers the life of a debtor and pays the proceeds to the creditor. See Decreasing Term Insurance.
Crediting Rate Crediting Rate: The interest rate applied to life insurance policies and annuity contracts, whether contractually agreed upon or declared for a specific period.
Crop-Hail Insurance Crop-Hail Insurance: A form of insurance that provides protection from damage to crops by hail and certain other named perils, such as fire, lightning and wind. Also referred to as Multiple Peril Crop.
Cut-Through Endorsement Cut-Through Endorsement: An amendment to an insurance policy for the benefit of a policyholder providing that, in the event of an insurer's insolvency, reinsurance payments shall be made by the reinsurer directly to the policyholder. Such payment bypasses or "cuts through" the usual payment route.
Cycle Cycle: See Underwriting Cycle.
Cycle Turn Cycle Turn: A change in the property-casualty underwriting cycle suggesting the arrival of either a hard insurance market or a soft insurance market. See also Underwriting Cycle, Hard Insurance Market and Soft Insurance Market.
DAC DAC: See Deferred Acquisition Costs.
DAC Tax DAC Tax: A form of federal alternative minimum tax imposed upon life insurers.
Daily Report Daily Report: A copy of an insurance policy used as the insurer's record of issuance.
DB DB: See Defined Benefit Plan.
DC DC: See Defined Contribution Plan.
Death Benefit Death Benefit: See Face Amount.
Debit Insurance Debit Insurance: See Industrial Life Insurance.
Declarations Declarations: The portion of an insurance policy that sets forth pertinent information regarding the insured and the coverage provided.
Declination Declination: The rejection of an application for insurance.
Decreasing Term Insurance Decreasing Term Insurance: A form of term life insurance in which benefits are reduced over the term of the policy.
Deductible Deductible: The up-front amount of a loss for which the insured is responsible before benefits are paid; also known as a self-insured retention. The insurer's liability begins when or if the deductible is exhausted.
Deductible Clause Deductible Clause: A provision in an insurance policy setting forth the amount of liability being retained by an insured and the sharing of losses once the deductible is exhausted.
Defendant Defendant: The party against whom a legal action has been brought.
Deferred Acquisition Costs (DAC) Deferred Acquisition Costs (DAC): Commissions and other selling expenses that vary with, and are directly related to, the production of business by an insurer. These acquisition costs are deferred and amortized to achieve a matching of revenues and expenses when reported in financial statements prepared in accordance with generally accepted accounting principles.
Deferred Annuity Deferred Annuity: An annuity that can be paid either with a single premium or with a series of installments and includes a schedule of periodic income benefit payments to commence after an accumulation period (more than one year). Because the inside build-up on life insurance products is tax-deferred, deferred annuities have become a very popular vehicle for retirement savings and tax planning. Deferred annuities can either be sold on a single-premium (SPDA) or flexible-premium (FPDA) basis.
Defined Benefit (DB) Plan Defined Benefit (DB) Plan: A retirement pension plan that provides a specified level of benefits upon an employee's retirement, with the employer being responsible for funding the plan. Benefits usually are expressed as a function of an employee's years of service and average salary over the last few years of employment. Plan participants have no responsibility for the investment strategy, which is borne by the sponsor, who has sole discretion over the investment of plan assets. If asset values decline, it is the obligation of the sponsor to make additional contributions to the plan.
Defined Contribution (DC) Plan Defined Contribution (DC) Plan: A retirement pension plan that allows an employee to make annual contributions to the plan, based on a percentage of compensation, with some of it usually (but not always) matched by the plan sponsor. Contributions and earnings thereon are tax-deferred. There is no guarantee as to the eventual level of benefits to be provided by this plan. The participant selects the desired investment options, which may be changed at regular intervals. The plan sponsor periodically reports to the participant on the amount that is in his or her account. The level of benefits ultimately payable out of plan assets is variable, and depends on the investment performance of the participant's selected asset mix.
Demutualization Demutualization: The process of converting a mutual company into a stock company.
Department of Health and Human Services Department of Health and Human Services: The federal department that is responsible for health-related programs and issues. Its Health Care Financing Administration (HCFA) agency administers the Medicare and Medicaid programs.
Deposit Administration Plan Deposit Administration Plan: A type of defined benefit plan that sets up a single fund for all eligible employees, into which deposits are accumulated and money is withdrawn at employees' retirement to purchase an annuity for the employee.
Deposit Term Insurance Deposit Term Insurance: A form of term life insurance in which the first year's premium is greater than those in successive years. See Term Life Insurance.
Deposit Term Insurance Deposit Term Insurance: A form of term life insurance in which the first year's premium is greater than those in successive years. See Term Life Insurance.
Deposit Term Insurance Deposit Term Insurance: A form of term life insurance in which the first year's premium is greater than those in successive years. See Term Life Insurance.
Deposits Deposits: Payments received by an insurer not included as revenue but included as a policyholder account balance.
Development Development: The change in loss estimates between reports.
Deviation Deviation: A change from the standard form or published rates of an insurer.
Diagnosis-Related Groups (DRG) Diagnosis-Related Groups (DRG): A reimbursement system used by Medicare and other insurers to classify illnesses according to diagnosis and treatment. It clusters patients into 468 categories on the basis of their illnesses, diseases and medical problems. All Medicare inpatient hospital operating costs are determined in advance and paid on a per-case basis, according to fixed amount or weight established for each DRG.