The Institutes Glossary


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A

For workers compensation purposes, the difference between a worker’s earnings before and after an injury.
The loss ratio achieved during a selected experience period.
A valuation method in business income policies designed to make the insured whole by demonstrating the actual amount of loss that occurs during the period of restoration.
Information that has been directly given to someone.
Hand delivery of a summons and complaint to a defendant.
A total loss of a vessel or cargo that occurs when the property is physically destroyed or is taken from its owner with no chance of recovery.
A department in an insurance company that performs ratemaking, verification of loss reserves, collection and analysis of insurer loss data to evaluate insurer profitability, analysis of data from other sources to determine the insurer’s competitive position, and preparation of statistical reports for management and regulatory authorities.
A ratemaking concept through which actuaries base rates on calculated loss experience to place insureds with similar characteristics in the same rating class.
The proposed rate change derived by actuarial analysis prior to company strategic influences.
A person who uses mathematical methods to analyze insurance data for various purposes, such as to develop insurance rates or set claim reserves.
A mechanical device that turns energy into motion or otherwise effectuates a change in position or rotation using a signal and an energy source.
Term describing a condition that typically has a sudden, severe onset and short duration and is often traceable to a specific event.
A gesture indicating a communicator's probable behavior.
Apply in addition to other policy limits and include claim expenses, first-aid, damage to property of others, and loss assessment.
A commercial property endorsement that enables the insured to cover selected items under the Building and Personal Property Coverage Form (BPP) that would otherwise be property not covered.
A person or an organization that is added to an insurance policy as an insured, usually by endorsement to the policy.
An endorsement that adds coverage for one or more persons or organizations to the named insured’s policy.
A coverage in homeowners policies that indemnifies the insured for the additional expenses that are incurred following a covered property loss so that the household can maintain its normal standard of living while the dwelling is being restored.
A balance sheet value that represents any excess value of stock over par value.
Occurs when a judge uses his or her discretion to increase a jury verdict award that is deemed insufficient.
In a no-fault system, a plan that provides certain personal injury protection (PIP)-type benefits such as medical payments and disability coverages to injured victims, without regard to fault.
The movement of an extremity toward the body.
The legal proceeding that an insurer, the employer, or a claimant must follow to dispute a workers compensation settlement.
For life insurers, the sum of the statutory capital, asset valuation reserve, and certain other conditional reserves.
A person responsible for investigating, evaluating, and settling insurance claims.
Expenses other than those included in defense and cost containment, such as those related to determining coverage, adjusting services, and settling claims.
Costs of adjusting a claim that relate to the overall operation of an insurer's claim function.
An act, a decision, a recommendation, or an omission made by a government official or agency within the authority of that office or agency.
An official governmental body that is empowered with the authority to implement and administer particular legislative acts.
A series of books containing a state’s administrative laws.
The statutory laws that grant power to administrative agencies to act and the body of law that is created by administrative agencies themselves.
The individual appointed by a probate court to administer a decedent's estate when the decedent has died without leaving a will (intestate).
An individual appointed by a probate court to administer the estate of a deceased person who left a will, but failed to appoint an executor, or whose appointed executor did not meet court approval or declined to serve as executor.
An individual appointed by a probate court to replace an original administrator cum testamento annexo who died, resigned, or was discharged before completing the estate administration.
An individual appointed by a probate court to replace an original administrator who died, resigned, or was discharged before completing the estate administration.
An individual appointed by a probate court to temporarily preserve the assets of a decedent’s estate when the will is contested and the person named executor cannot qualify, or when a regular or permanent administrator cannot be appointed for some other reason.
Legal proceedings that involve waterways and seas, including vessels, transportation of people or cargo by ship, vessel personnel, harbors, and virtually all matters related to waterways.
A specialized branch of federal law pertaining to claims for occurrences that take place on navigable waters and are connected with maritime activity.
A court bond produced for legal matters that relate to the sea or waterways.
Factual statements that, unless denied, bind the party at trial.
A premium base that reflects the insured's liability exposure arising from the number of persons, other than employees of the insured, admitted to an insured event or to events conducted on the insured's premises.
Statements against the personal, pecuniary, or proprietary interest of a witness that subject him or her to civil or criminal liability.
Assets meeting minimum standards of liquidity that an insurer is allowed to report on its balance sheet in accordance with statutory accounting principles.
Insurance provided in a jurisdiction by an insurer that is licensed to do business in that jurisdiction.
An insurer to which a state insurance department has granted a license to do business within that state.
See Standard market.
The distribution system consisting of admitted insurers and their producers.
The premium that a shipowner pays to its P&I club at the beginning of a coverage year.
A payment made to a claimant following a loss to cover the immediate expenses resulting from that loss.
A partial payment to a third-party claimant that is issued before obtaining a signed release.
A bond that guarantees that the contractor will use advanced funds for their intended purpose.
A document that helps keep track of payments made under certain coverages, helps comply with unfair claims practices laws, and clarifies to the insured that the advance payments will be applied against the final claim.
Increasing claims costs for which the reserves are inadequate.
An opinion rendered by an auditor that indicates that the financial statements do not fairly present the financial position of a company and that explains the reasons for this conclusion.
The claim of ownership of land by possession that is exclusive, open, hostile, unpermitted, and continuous for a statutory period.
In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.
The decision to reinsure those loss exposures that have an increased probability of loss because the retention of those loss exposures is undesirable.
A written interpretation of the CPCU Code of Professional Conduct provided by the Board of Ethical Inquiry.
An independent organization that works with and on behalf of insurers that purchase or subscribe to its services.
An independent organization, working with and on behalf of insurers that purchase or subscribe to its services, that collects and reports loss experience but, unlike rating bureaus, does not use these data to prepare and file rate filings.
Insurance rates developed by an organization—a rating bureau for member organizations—that prepares all or parts of rate fillings and submits them to regulators on behalf of it members.
A person who provides information on an affidavit and promises that it is true.
A signed statement summarizing efforts to find coverage from admitted insurers.
Financing technique to fund losses from a combination of premiums paid by the parent to the captive for an insurance policy, from investment income on those funds, and from reinsurance purchased from other insurers.
A reinsurance treaty clause that broadens the treaty's scope to include the primary insurer's affiliated companies.
Insurers that have a relationship with one another in some way.
A type of group marketing that targets various groups based on profession, association, interests, hobbies, and attitudes.
A written plan that the federal government requires of employers with federal contracts, detailing how the employer will meet hiring goals for groups the law protects from discrimination.
A policy condition that is supposed to exist on the date that the warranty is made.
A guarantee that specific facts exist at the time a contract forms.
A social goal of insurance that states that a ceiling placed on rates keeps coverage available so people can purchase it, that rates are determined so that they transfer a portion of the costs of coverage from high-risk insureds to the remaining insureds, or that a subsidy from outside the insurance mechanism offsets premiums that are deemed unaffordable.
An advertising budgeting method with which an organization focuses all its internal resources on operations and production and allocates what remains to advertising.
A new vehicle part that is made by a manufacturer other than the vehicle manufacturer.
A minor earthquake following a greater one and originating at or near the same place
A classification of vehicles based on the vehicle's model year.
A report used to determine which customers are behind in paying their premiums; usually generated in thirty-day past-due increments.
A legal, consensual relationship that exists when one party, the agent, acts on behalf of another party, the principal.
A payment procedure in which a producer sends premium bills to the insured, collects the premium, and sends the premium to the insurer, less any applicable commission.
An insurer billing system that requires the agency to perform certain premium handling tasks, including invoicing and crediting, collecting premiums, investing premiums, and remitting premiums, to companies (less any applicable commissions).
One party appoints another party to act on its behalf, usually with a written agreement outlining the scope of representation.
An agency relationship created by a principal's words or conduct that cause a third party to reasonably believe that an agency exists.
The principal affirms that agency has existed and accepts the previous acts as the acts of an agent on the principal’s behalf.
A type of group captive that is owned by insurance agents or brokers rather than by the organizations insured.
A written agreement between an insurer and an agent that specifies, among other things, the scope of the agent's authority to conduct business for the insurer.
The costs associated with managing the relationship between agent and principal.
The costs associated with managing the agency (principal-agent) relationship between shareholders and corporate decision makers.
The record of an insurance agency's present policyholders and the dates their policies expire.
A system that integrates customer, policy, and accounting information with service and sales information, insurer communications, and information about other agency operations.
The electronic exchange and communication of data between agencies and companies.
In the agency relationship, the party that is authorized by the principal to act on the principal's behalf.
A relationship in which the producer is legally bound to the principal.
Circumstances surrounding a loss that elicit emotional responses that influence juries’ assessments of damages.
An increasing in seriousness or severity; an act or circumstance that intensifies or makes worse.
A deductible that limits the total amount of losses retained during a year.
The total amount of unfinished work.
A deductible that applies collectively to all losses occurring during a specific period, typically a policy year.
Insurance that covers losses only after the insured has retained a stated amount of aggregate loss during the policy period.
An excess liability policy that requires the insured to retain a specified amount of loss from the first dollar during a specified period of time, usually one year; the insurer then pays all loss for that period that exceeds the retention, up to the policy limit.
A type of excess of loss reinsurance that covers aggregated losses that exceed the attachment point, stated as a dollar amount of loss or as a loss ratio, and that occur over a specified period, usually one year.
A type of excess of loss reinsurance that covers aggregated losses that exceed the attachment point, stated as a monetary amount of loss or as a loss ratio, and that occur over a specified period, usually one year.

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