Definitions, examples and insights into global insurance, reinsurance and regulation.
FINANCIAL & ACCOUNTING TERMS
1/24 method is a method of calculating earned premium on the basis of a two-year (24-month) policy term.
LIFE & HEALTH INSURANCE
Accidental death and disablement is an insurance concept that refers to death and/or disablement caused by accidental means (rather than by natural causes).
PROPERTY INSURANCE
Accidental loss or damage is another term for all risks.
INSURANCE DISTRIBUTION
Accommodation basis is a basis on which an insurer may grant particular (usually undesirable) cover or certain terms and conditions of cover in order to ‘accommodate’ an existing relationship with a broker and/or insured.
RISK & EXPOSURE
Accumulation is a risk concentration concept in insurance that describes multiple insured risks exposed to the same loss event.
Read the full definition of Accumulation >FINANCIAL & ACCOUNTING TERMS
Acquisition costs are insurer expenses incurred to obtain business, including commissions, brokerage and taxes paid during policy acquisition.
Read the full definition of Acquisition costs >EMPLOYEE BENEFITS & PENSIONS
An additional voluntary contribution is a pension contribution paid above the amount required by the rules of an employee benefit plan.
FINANCIAL & ACCOUNTING TERMS
Admissible assets is a UK term that refers to those assets deemed acceptable for consideration in determining an insurance company’s ‘net assets’, for example for the purposes of determining the company’s solvency margin.
Such assets might include bonds, shares and loans.
INTERNATIONAL INSURANCE & REGULATION
Admitted refers to an insurer or intermediary that is authorised by the relevant local supervisory authority to write or place insurance business.
Read the full definition of Admitted >FINANCIAL & ACCOUNTING TERMS
Admitted assets are assets that US statutory accounting rules allow insurers to include when calculating surplus to policyholders.
COMMERCIAL INSURANCE
Advance loss of profits (ALOP) is a form of business interruption cover that relates to the expected profits of a new business or an extension to an existing business.
The cover insures against loss of profit resulting from delay in the completion of contract works when said delay is due to a loss insured under a CAR or EAR policy.
COMMERCIAL INSURANCE
Advance profits insurance is another term for advance loss of profits.
INSURANCE DISTRIBUTION
Affinity groups is an insurance term that refers to subgroups of personal lines consumers defined by a common factor such as age, occupation or shared interest.
INSURANCE DISTRIBUTION
Agency agreement is a written contract between an agent and a principal that declares the terms under which the agent operates on behalf of that principal.
Agency agreements typically contain information relating to the responsibilities of each party, the extent of the agent’s authority, commission levels and details on the handling of monies, for example premium and claims money.
INSURANCE DISTRIBUTION
An agent is an insurance intermediary that acts on behalf of an insurer or reinsurer to solicit, negotiate or effect insurance contracts.
Read the full definition of Agent >INSURANCE DISTRIBUTION
Agent, captive is another term for agent, tied.
INSURANCE DISTRIBUTION
Agent, exclusive is another term for agent, tied.
INSURANCE DISTRIBUTION
Agent, independent is an insurance agent that works on behalf of several insurers and is permitted to sell any of those insurers’ products.
MARINE & CARGO INSURANCE
Agent, shipping and forwarding is a freight forwarder.
INSURANCE DISTRIBUTION
Agent, tied is an insurance agent that works exclusively for one insurance company and has in-depth knowledge of that company’s products.
CLAIMS & POLICY MECHANICS
Aggregate excess insurance is a type of cover that becomes effective when losses exceed a certain amount during the period of insurance.
CLAIMS & POLICY MECHANICS
Aggregate limit of liability is another term for limit of liability, aggregate.
INSURANCE DISTRIBUTION
Aggregator is an online company or website that gathers and analyses information from different sources on the products and services offered by different companies and filters it through one website.
In insurance markets, aggregators tend to manifest themselves as price comparison websites.
PROPERTY INSURANCE
All risks is a form of property insurance that covers loss or damage from any cause not specifically excluded by the policy.
Read the full definition of All risks >LEGAL & DISPUTE RESOLUTION
Alternative dispute resolution is a legal process in insurance that resolves disputes through methods such as arbitration, mediation or conciliation instead of litigation.
Read the full definition of Alternative dispute resolution (ADR) >RISK & EXPOSURE
Alternative risk transfer is a risk financing approach that uses structures such as captives, pools or finite risk insurance outside traditional insurance placement.
Read the full definition of Alternative risk transfer (ART) >LIFE & HEALTH INSURANCE
Annuity is a periodic payment (often under a pension scheme) for the lifetime of the annuitant (or any agreed shorter period) in return for cash provided as a lump sum premium or a series of periodic premiums.
LEGAL & DISPUTE RESOLUTION
Arbitration is an alternative dispute resolution process in which an independent arbitrator decides the outcome of an insurance or legal dispute.
Read the full definition of Arbitration >LIABILITY INSURANCE
Asbestosis is a potentially fatal lung condition caused by the inhalation of asbestos dust or fibres.
REINSURANCE
Assumed reinsurance is reinsurance business accepted by an insurer or reinsurer from another insurance company.
Read the full definition of Assumed reinsurance >LIFE & HEALTH INSURANCE
The term insurance relates to an event that may or may not happen e.g. death within a fixed period (term insurance).
The term assurance relates to an event that is certain, e.g. death (whole of life assurance) or death or survival over a given term of years (endowment assurance).
The terms are used interchangeably. In a Lloyd’s policy, both words occur and have the same meaning.
MOTOR INSURANCE
Auto casco is another term for motor casco.
CLAIMS & POLICY MECHANICS
Automatic reinstatement is a policy provision through which the sum insured or indemnity limit is automatically reinstated following a loss.
MARINE & CARGO INSURANCE
Average in marine insurance is a partial loss concept that distinguishes between general average and particular average losses.
Read the full definition of Average (marine) >CLAIMS & POLICY MECHANICS
Average in non-marine insurance is a property insurance condition that reduces claim payments when the insured has under-declared the value at risk.
Read the full definition of Average (non-marine) >CLAIMS & POLICY MECHANICS
Average, condition of is a policy condition in property insurance that requires that the amount of a claims payment be reduced proportionately in the event of underinsurance.
This means that the payment will be in proportion to the sum insured rather than the actual value of the property at risk at the time of the loss.
Any sum insured that is stated as “subject to average” in the policy wording is liable to be reduced through average.
MARINE & CARGO INSURANCE
Average, general is a partial loss in marine insurance that is due to actions taken and/or expenses incurred in protecting a ship, its crew and its cargo.
Such actions can include the voluntary and deliberate sacrifice of cargo and expenses can be the towing of the ship to a port.
General average is a mechanism for recovering the costs of these types of losses and expenses from those who benefit ultimately from their having taken place (where the losses and expenses have been incurred for the ‘greater good’).
In practice, most general average losses are shared proportionately between cargo owners and shipowners.
MARINE & CARGO INSURANCE
Average, particular is a partial loss in marine insurance that is caused by an insured peril.
In practice, the term ‘particular average’ is applied to any claim for damage to a ship or to cargo that is not due to general average sacrifice.
LEGAL & DISPUTE RESOLUTION
Award is a form of monetary payment that may be compensatory in nature and may be mandated by a court ruling.
LEGAL & DISPUTE RESOLUTION
The decision reached by the arbitrator in a process of arbitration.
An arbitration award is akin to a court ruling and does not necessarily or exclusively signify monetary payment.
COMMERCIAL INSURANCE
Bad debts insurance is another term for credit insurance.
INSURANCE DISTRIBUTION
Bancassurance is the distribution of insurance products and provision of insurance services by banking institutions or by insurance companies wholly or partly owned by banks.
ISLAMIC INSURANCE
A term thought to have derived from the more commonly used ‘bancassurance’, bancatakful pertains more specifically to the selling of takaful products by banking institutions or by insurance companies wholly or partly owned by banks.
Distribution of takaful products through bancatakaful may be facilitated through use of bank customer databases and existing marketing and sales channels.
LIABILITY INSURANCE
Bankers’ Blanket Bond (BBB) is a product for financial institutions that provides protection against direct financial loss resulting from fraud or other criminal activities on the part of either the institution’s employees or third parties.
FINANCIAL & ACCOUNTING TERMS
Basis point (BPS) is an insurance term that refers to one hundredth of one percentage point (0.01 per cent).
EMPLOYEE BENEFITS & PENSIONS
Benefit in kind is an employee benefit that is not in the form of cash, such as a company car, private fuel, free or subsidised accommodation and holidays.
CLAIMS & POLICY MECHANICS
A benefit policy is an insurance policy that pays out fixed benefits in the event of a claim.
The amount of the fixed benefits is agreed between the insurer and policyholder before policy inception and is not based on the principle of indemnity, which is intended to restore the insured to the financial position that he or she enjoyed immediately before the loss. Because benefit policies are taken out for personal accident cover and health cover (as well as life insurance and annuities) - and pay out when the policyholder suffers an injury, illness or death - the principle of indemnity can not apply, as no price can be put on the value of the loss of a limb or loss of sight or death. As such, insureds are allowed to choose the amount of the fixed benefits that suits them.
MARINE & CARGO INSURANCE
A shipping document issued by a carrier to a cargo exporter.
It describes the goods being shipped and also serves as a receipt and a definition of the contract between the parties involved, outlining the shipowner’s duties and responsibilities for the goods from the port of shipment to the port of destination. The bill may be signed with qualification if the goods are in any way unsound; qualified bills are referred to as ‘dirty’ or ‘unclean’.
INSURANCE DISTRIBUTION
Binding authority is a written agreement that allows an agent or broker to accept insurance or reinsurance business on behalf of a reinsurer.
Read the full definition of Binding authority >MOTOR INSURANCE
The blue card system is an international motor insurance scheme in operation in Association of Southeast Asian Nations (ASEAN) member states.
The blue card is an identification card which provides evidence that the driver holds a compulsory motor vehicle insurance policy issued by the appropriate bureau in his or her home country. A blue card is valid for one 12-month period at a time and for one vehicle only.
EMPLOYEE BENEFITS & PENSIONS
Blue collar employee is a term that describes an employee who performs manual labour.
MARINE & CARGO INSURANCE
Blue water hull is an insurance term for ocean-going hull.
PROPERTY INSURANCE
A type of cover to protect the insured against loss incurred as a result of boiler breakdown.
The insurance often covers repair or replacement costs for the boiler, resultant property damage and third party liability, and the business interruption risk. Boiler insurance is often coupled with machinery breakdown insurance. In recent years, boiler and machinery breakdown insurance has become replaced by equipment breakdown insurance, which covers a broader range of equipment and perils.
INVESTMENT & SAVINGS PRODUCTS
A bond is an arrangement whereby in return for a lump sum (the minimum investment is usually £1,000 or more) the insurer provides either an income (guaranteed or otherwise) payable monthly or annually (income bond) or accumulates the interest in order to make a cash payment at the end of the term (growth bond).
In both cases terms of one to five years are common. The return on growth bonds may be linked to some form of equity, property or cash fund operated by the insurer.
MOTOR INSURANCE
Bonus malus is a motor insurance claims system in which discounts are given for claims- free driving (bonus) and surcharges are imposed when claims are made (malus).
FINANCIAL & ACCOUNTING TERMS
Book of business is the aggregate of policies that an insurer has in force at a given point in time.
EMPLOYEE BENEFITS & PENSIONS
Book Reserve Scheme is a pension scheme under which the employer is responsible for the payment of benefits which are financed by a provision in the employer’s accounts.
REINSURANCE
A report containing details of premium and claims.
Bordereaux are prepared periodically by cedants for reinsurers to notify them of risks accepted and claims paid.
REINSURANCE
Bouquet treaty is a reinsurance treaty that combines contracts from different classes of business and usually contains both attractive and unattractive contracts.
INSURANCE DISTRIBUTION
A broker is an independent insurance intermediary that arranges insurance or reinsurance cover for clients by placing risks with suitable insurers.
Read the full definition of Broker >INSURANCE DISTRIBUTION
Broker, producing is another term for broker, retail.
INSURANCE DISTRIBUTION
A retail broker is an insurance broker that deals directly with insured clients and arranges suitable insurance cover for their risks.
Read the full definition of Broker, retail >INSURANCE DISTRIBUTION
Broker, sub is the term sub-broker is commonly understood to refer to a retail broker.
INSURANCE DISTRIBUTION
A wholesale broker is an insurance broker that helps retail brokers place larger, complex or specialist risks in suitable insurance markets.
Read the full definition of Broker, wholesale >INSURANCE DISTRIBUTION
May refer to the work carried out by an insurance broker but more commonly refers to remuneration made to/received by a broker for broking services provided.
Brokerage may be in the form of commission from the insurer and/or a fee charged to the broker’s client but typical practice is for one or the other.
MOTOR INSURANCE
International motor insurance scheme established by the Economic Community Of West African States (ECOWAS) to provide evidence of cover for drivers’ motor third party liability when driving through states that are signatories to the Brown Card (Carte Brune) system.
MARINE & CARGO INSURANCE
Brown water hull is an insurance term for vessels on lakes and rivers.
MARINE & CARGO INSURANCE
Builders’ risks insurance (marine) is insurance that covers vessels during construction.
COMMERCIAL INSURANCE
US term for insurance cover purchased by contractors to cover damage to property under construction.
The cover is normally written on an all risks basis, with the estimated completed value of the construction project as the sum insured. The cover is commonly referred to as contractors all risks or construction all risks insurance outside the US.
FINANCIAL & ACCOUNTING TERMS
Burning ratio is a ratio established by comparing actual losses with the amount of earned premiums.
NATURAL CATASTROPHE & WEATHER
Bushfire is another term for wildfire.
COMMERCIAL INSURANCE
Business interruption is a type of insurance that covers loss of gross profit and related costs following insured property damage.
Read the full definition of Business interruption (BI) >MARINE & CARGO INSURANCE
The transport of cargo or passengers between two locations in one jurisdiction by a vessel registered in another jurisdiction.
This term applied originally to ships and the shipping industry but is now also used in reference to aircraft, trains and road vehicles. Most countries do not permit cabotage.
RISK & EXPOSURE
Capacity is the measure of an insurer’s ability to write new business or the monetary amount an insurer can accept on a particular risk.
RISK & EXPOSURE
A captive is an insurance company established by a parent organisation to insure some or all of that organisation’s risks.
Read the full definition of Captive >INSURANCE DISTRIBUTION
Captive agent is another term for agent, tied.
RISK & EXPOSURE
Captive domicile is a country or state that encourages the formation of captive insurance companies.
EMPLOYEE BENEFITS & PENSIONS
Used by plans that are provided on a defined benefit basis whereby the benefits are based on the employee’s pensionable salary over the entire period of qualifying service with the employer.
MARINE & CARGO INSURANCE
Goods or property transported commercially by air, rail, road or water.
Goods considered cargo are those that are not for use by those on board the transportation vessel for the period of transportation (i.e. anything that is not provisions, equipment or fuel).
MARINE & CARGO INSURANCE
Cargo clauses are policy clauses used in marine and transport insurance to cover goods or property while in transit.
MARINE & CARGO INSURANCE
Cargo insurance is a type of marine or transport insurance that covers goods or property while they are in transit.
Read the full definition of Cargo insurance >MOTOR INSURANCE
Carte brune is another term for brown card.
MOTOR INSURANCE
Casco is another term for motor casco.
INVESTMENT & SAVINGS PRODUCTS
Unit-linked life offices may launch a cash (or money) fund.
The managers invest only in short term deposits with banks and local authorities. The interest rate they obtain is usually better than that which could be achieved by the investors acting as individuals.
MARINE & CARGO INSURANCE
Casualty in marine insurance is a loss event, most commonly associated with marine hull business.
LIABILITY INSURANCE
Casualty (non-marine) is an accident that causes loss.
LIABILITY INSURANCE
Casualty insurance is a category of non-life insurance that primarily covers liability risks such as employers’ liability, environmental liability and product liability.
Read the full definition of Casualty insurance >NATURAL CATASTROPHE & WEATHER
A catastrophe is a severe loss event in insurance, often linked to natural disasters such as hurricanes, earthquakes or floods.
Read the full definition of Catastrophe >NATURAL CATASTROPHE & WEATHER
The Catastrophe Risk Evaluating and Standardising Target Accumulations (Cresta) organisation is an independent body established in 1977.
It is responsible for the technical management of natural hazard coverage and sets out a uniform global system for transferring aggregated exposure data among insurers, brokers and reinsurers to facilitate accumulation control and risk modelling. Cresta fixes country-specific zones for reporting exposure data, promotes a standard template for exchanging that data and offers a mapping service. Its standards are used throughout the insurance industry. Information reproduced here appears courtesy of Cresta.
NATURAL CATASTROPHE & WEATHER
CatNet (R) is an “online natural hazard information and mapping system”, developed and maintained by Swiss reinsurer Swiss Re.
REINSURANCE
Cedant is an insurer that cedes business to one or multiple reinsurers.
REINSURANCE
Cede is an insurance transaction in which an insurer transfers insurance business to one or multiple reinsurers.
REINSURANCE
Cession is an insurance term that refers to insurance business that insurers have transferred (ceded) to reinsurers.
LIFE & HEALTH INSURANCE
A life assurance policy under which, until the child reaches the so-called “vesting age” (18 or 21), the policy is owned and the premium paid by the parent.
At vesting age the child has the right to take out a policy in his or her own name up to a fixed sum assured at the insurer’s normal rate of premium without evidence of health.
INSURANCE DISTRIBUTION
The practice (by brokers or agents) of encouraging clients to surrender or cancel an existing policy in favour of setting up a new policy, through which the broker/agent will earn sizeable commission.
Churning is illegal in many jurisdictions.
CLAIMS & POLICY MECHANICS
A demand by the insured that the insurer pay the indemnity or benefit to which the insured is entitled under the terms of the policy.
Claims are met, subject to limits, if the loss event is caused by an insured peril and is not excluded.
CLAIMS & POLICY MECHANICS
Claims-made is a liability policy basis that covers claims first notified during the policy period, regardless of when the loss occurred.
Read the full definition of Claims-made >LEGAL & DISPUTE RESOLUTION
Also known as group litigation, a class action is the aggregation of a number of lawsuits, each based on the same legal grounds and seeking indemnity for the same loss or type of loss, which are handled by a single legal representative or select group of representatives.
In order to qualify as a class action, the action must be certified by a court.
INSURANCE MARKET CLASSIFICATION
Class of business is an insurance classification that groups policies by category, such as motor, property, liability or marine.
Read the full definition of Class of business >EMPLOYEE BENEFITS & PENSIONS
Closed plan is a plan that does not accept new members.
LIFE & HEALTH INSURANCE
Cluster policies have their origin in the introduction of unit-linked life assurance.
When an assured pays a given premium he or she receives not only one policy but a number of policies of equal value which offer advantages for tax planning. Each policy is issued in return for an equal fraction of the total premium payable.
CLAIMS & POLICY MECHANICS
1. The method of sharing a risk between two or more insurers, each of which bears a proportion of the claims that may be incurred. Whilst in practice, the insurer with the smaller proportion of the business normally follows the decision of the insurer with the larger proportion, coinsurers are not obliged to follow one another’s decisions. Exceptions to this may be found if an insurer has consented to another insurer acting on its behalf. Each insurer involved in coinsurance is in direct contractual relationship with the insured and not with the other coinsurers.
2. A term used to describe situations in which the insured shares part of the risk and in so doing becomes a coinsurer. Insurers sometimes require that the insured takes on some of the risk. Coinsurance differs from more commonplace excess or deductible arrangements in that, under coinsurance, the insured is responsible for a larger proportion of each loss incurred, such as 10% of every claim made under its policy.
CLAIMS & POLICY MECHANICS
In the US, coinsurance refers to the condition of average.
This is a policy condition that allows for partial loss claim payments to be reduced in the event of underinsurance.
EMPLOYEE BENEFITS & PENSIONS
Collective agreement is an agreement between the employer and employee representatives (such as a trade union) in respect of the terms and conditions of employment.
CLAIMS & POLICY MECHANICS
Combined single limits are liability policy limits that apply one maximum amount to bodily injury and property damage claims together.
COMMERCIAL INSURANCE
Commercial lines are insurance products designed to protect businesses against risks such as property damage, liability, construction, motor and business interruption.
Read the full definition of Commercial lines >INSURANCE DISTRIBUTION
Commission is remuneration paid by an insurer or reinsurer to an intermediary for selling, placing or handling insurance business.
Read the full definition of Commission >EMPLOYEE BENEFITS & PENSIONS
Commutation is the act of giving up part or all of a pension in exchange for an immediate lump sum.
LIABILITY INSURANCE
Comparative negligence is another term for contributory negligence.
PROPERTY INSURANCE
Composite insurer is an insurance company that transacts both life and non-life (property and casualty) business.
LIFE & HEALTH INSURANCE
A bonus added to with-profit (participating) life assurance policies such as whole life or endowment, which is expressed as a percentage of the sum assured and any previous bonus that has been declared on the policy.
Bonuses once declared are guaranteed and are paid with the sum assured when a claim is made at death or maturity.
MOTOR INSURANCE
Signifies a policy that includes several different types of cover.
Normally relates to comprehensive car insurance, which may cover personal accident, fire, theft and accidental damage, as well as third party liability.
INTERNATIONAL INSURANCE & REGULATION
Compulsory insurance is insurance that must be purchased to comply with legal, professional or regulatory requirements in a specific jurisdiction.
Read the full definition of Compulsory insurance >POLICY WORDING & COVERAGE
A stipulation imposed by the insurer as part of the insurance contract.
Contract conditions may require the insured to do or refrain from doing one or several things and insureds are required to abide by any such conditions unless the insurer chooses to waive the requirement. Should an insured break a contract condition, the insurer (i.e. the other party to the contract) is permitted to avoid the policy from inception.
LEGAL & DISPUTE RESOLUTION
Conditional fee system is a system whereby a claimant’s solicitors and counsel are remunerated only (and at a higher rate) if the legal case is settled or adjudicated in the claimant’s favour.
COMMERCIAL INSURANCE
Insurance covering loss of money, loss of profits and other costs resulting indirectly, often unforeseeably, from an insured loss event or breach of contract.
The insurer(s) liable for the insured loss event are not liable for any consequential losses, which is why insurance against losses resulting indirectly from the losses or actions of others must be insured against. The term ‘consequential loss’ has been for the most part replaced by business interruption.
COMMERCIAL INSURANCE
Construction all risks (CAR) is another term for contractors all risks.
CLAIMS & POLICY MECHANICS
A means of calculating the level of benefit payable under a personal accident policy.
The level of benefit payable is adjusted on a percentage basis in direct relation to the level of injury sustained.
LEGAL & DISPUTE RESOLUTION
A system whereby a lawyer for a claimant is remunerated only if the legal case is settled or adjudicated in the claimant’s favour.
The basis of remuneration is a percentage of the settlement or award, usually about one third. Most personal injury cases in the US are handled in this way.
EMPLOYEE BENEFITS & PENSIONS
Continuous service is a period of unbroken service rendered by an employee (may include periods of absence for which salary is paid or service with a different employer following the transfer of a business).
EMPLOYEE BENEFITS & PENSIONS
Commonly used to refer to the option to join an employer sponsored plan in lieu of a state plan.
This would typically involve forfeiting the state benefit for an employer sponsored plan benefit at least equivalent to the state benefit and a reduction in the contributions paid to the state plan.
COMMERCIAL INSURANCE
Contractors all risks is construction insurance that covers damage to contract works and related third party liabilities.
Read the full definition of Contractors all risks >ISLAMIC INSURANCE
A contribution in Islamic insurance is the equivalent of a premium in conventional insurance.
The term is used because takaful or Islamic insurance is fundamentally based upon mutual help and assistance and not upon the desire of any party to profit from the arrangement.
CLAIMS & POLICY MECHANICS
The principle of contribution is an insurance principle that shares a loss between multiple indemnity policies covering the same risk and peril.
Read the full definition of Contribution, principle of >LIABILITY INSURANCE
Doctrine whereby a plaintiff is found by a court to have contributed to some degree to the loss for which he or she is seeking compensation.
Damages recoverable can be reduced according to the claimant’s share of the blame. In some US states this is known as comparative negligence.
EMPLOYEE BENEFITS & PENSIONS
Contributory plan is a plan that requires an employee contribution.
LIFE & HEALTH INSURANCE
A term insurance policy (i.e. the sum insured is payable on death within the policy term with no survival benefits) giving the option to convert within the policy term to a permanent policy (i.e. a whole of life or endowment assurance) without further evidence of health.
MARINE & CARGO INSURANCE
A standard term of sale for goods in transit.
This term denotes that the cost of freight is included in the price of the goods but that it is the buyer’s responsibility to purchase transit insurance.
MARINE & CARGO INSURANCE
A standard term of sale for goods in transit.
This term denotes that the cost of freight and insurance are included in the price of the goods, i.e. that it is the seller’s responsibility to purchase transit insurance.
COMMERCIAL INSURANCE
Credit insurance is commercial insurance that protects against financial loss caused by customer insolvency or payment default.
Read the full definition of Credit insurance >LIFE & HEALTH INSURANCE
A form of decreasing term insurance to cover the outstanding debt under hire purchase and credit sale agreements.
Cover is provided under a collective policy to the creditor e.g. finance company, to facilitate repayment on the death of any hirer or debtor. Arrears are not covered.
LIFE & HEALTH INSURANCE
Creditor insurance is a policy covering the inability to repay a loan, a credit card balance or a mortgage.
NATURAL CATASTROPHE & WEATHER
Cresta is another term for Catastrophe Risk Evaluating and Standardising Target Accumulations.
LIFE & HEALTH INSURANCE
If the insured is struck by one of a number of specified diseases or illnesses (e.g. heart disease, stroke, cancer, multiple sclerosis) the insurer will pay a lump sum.
This has some advantages over a regular income (which can be secured under permanent health insurance) and would enable a disabled person to retire early, take long convalescent periods or adapt their home to help them cope with their disability.
INTERNATIONAL INSURANCE & REGULATION
Cross-border business is insurance or reinsurance transacted across national borders, often involving risks, insurers or policyholders in multiple countries.
Read the full definition of Cross-border business >INTERNATIONAL INSURANCE & REGULATION
Cross-frontier business is another term for cross-border business.
NATURAL CATASTROPHE & WEATHER
Cyclone is a tropical storm made up of a system of winds rotating inwards to a low- pressure area.
MARINE & CARGO INSURANCE
Deadweight tonnage is a shipping measure that describes the total weight a vessel can transport, including cargo, stores and fuel.
EMPLOYEE BENEFITS & PENSIONS
Death in retirement benefits are employee benefits paid where death occurs after the employee has retired.
EMPLOYEE BENEFITS & PENSIONS
Benefits paid where death occurs whilst the employee is in the service of an employer.
There is no requirement that death should arise from the work.
PROPERTY INSURANCE
Decennial insurance is property cover that protects owners against damage or collapse caused by faulty design, construction or materials for a ten-year period.
Read the full definition of Decennial insurance >LIFE & HEALTH INSURANCE
A term insurance policy under which the sum payable on death decreases each year in accordance with a fixed scale.
If the insured survives the whole of the policy term nothing is payable by the insurers, who retain all premiums.
CLAIMS & POLICY MECHANICS
A deductible is a policy feature that requires the insured to bear part of a loss before the insurer pays the remaining claim.
Read the full definition of Deductible >CLAIMS & POLICY MECHANICS
Deductible, disappearing is another term for franchise.
CLAIMS & POLICY MECHANICS
A deductible that operates on the basis of time rather than a monetary amount or percentage of a policy limit.
Time deductibles are most commonly seen in business interruption, workers’ compensation and medical insurance policies, where the policy terms and conditions may state that, for example, all costs incurred and losses resulting following a loss event are borne by the insured (rather than the insurer) for the 72 hours immediately following the loss event. Only once this agreed time period is exceeded does the insurer become liable to pay the (remainder of) the claim; in this way, application of a time deductible reduces the insurer’s limit of indemnity.
FINANCIAL & ACCOUNTING TERMS
Acquisition costs (i.e. any and all costs incurred by an insurer or reinsurer in acquiring business) that are carried over to a subsequent accounting period so that the acquisition costs are shown within the same period as any corresponding income generated.
LIFE & HEALTH INSURANCE
Deferred annuity is an annuity providing for the commencement of regular payments at an agreed future date or age.
EMPLOYEE BENEFITS & PENSIONS
A deferred benefit relates to a vested benefit that has been accrued by the employee before leaving the service of an employer (may be a portable benefit transferrable to another employer), such as a paid up pension; the deferred benefit is typically paid at retirement.
EMPLOYEE BENEFITS & PENSIONS
Deferred compensation is a benefit earned by an employee at one time for which the employee becomes eligible at another time (typically after fulfilling vesting requirements), such as a pension plan.
EMPLOYEE BENEFITS & PENSIONS
Benefits are determined by the benefit calculation formula.
Formulas vary from plan to plan and might include a percentage of career average earnings, a percentage of average earnings during a prescribed period (such as the last five years of service or the best three years), or a flat rate amount or a flat rate per year of service.
EMPLOYEE BENEFITS & PENSIONS
Benefits are determined by the value of the total accumulated fund.
Contributions are usually defined as a flat rate or percentage of pensionable salary (minimum and/or maximum contribution levels may be prescribed); ad hoc contributions and additional voluntary contributions may also be permissible. The value of the total accumulated fund is contingent upon the accumulation of contributions and investment returns within the plan.
EMPLOYEE BENEFITS & PENSIONS
Dependant is a person, normally a family member, who is reliant on the employee for financial support.
EMPLOYEE BENEFITS & PENSIONS
A form of group life insurance that is an alternative for, or in addition to, a lump-sum payment.
It provides a benefit to a widow or widower or dependant children of the deceased in the form of an annuity ceasing at a fixed date, the fixed date coinciding with the date on which the member of the scheme would have been expected to retire or typically until age 18 or 21 of dependant children.
GLOBAL PROGRAMMES & CROSS-BORDER COVER
Difference in conditions is an international insurance policy structure that fills coverage gaps left by local policies in a multinational insurance programme.
Read the full definition of Difference in conditions (DIC) >GLOBAL PROGRAMMES & CROSS-BORDER COVER
Difference in limits is an international insurance policy structure that provides excess limits above local policies in a multinational insurance programme.
Read the full definition of Difference in limits (DIL) >REINSURANCE
Denotes an insurer, as opposed to a reinsurer.
The term ‘direct writer’ is often used in place of ‘direct insurance company’, or ‘direct insurer’. In the United States the term is sometimes used more specifically to refer to an insurer that deals ‘directly’ with the policyholder and not through an intermediary.
FINANCIAL & ACCOUNTING TERMS
Direct insurance premiums is an insurance concept that refers to gross written premium including commissions and charges and before reinsurance cessions.
INSURANCE DISTRIBUTION
Direct marketing encompasses all those marketing methods that insurers use to sell business without the use of an intermediary.
Such methods may include targeted mailings and telesales and are carried out by insurance company employees. Although these methods allow insurers to save on the costs of paying sales staff, direct marketing entails great expense in advertising and promotion, often on the radio or television or in the paper press.
INSURANCE DISTRIBUTION
Refers to a form of marketing that is designed to encourage prospective customers to respond directly to the advert that they have seen.
This ‘response’ can be in the form of calling an advertised telephone number, responding to an address provided or clicking a link online.
INSURANCE DISTRIBUTION
Direct writer is another term for direct insurance company.
LIABILITY INSURANCE
Directors’ and officers’ liability is insurance that protects company directors and officers against claims alleging negligence, breach of duty or wrongful acts.
Read the full definition of Directors’ and officers’ liability (D&O) >LIFE & HEALTH INSURANCE
Double Endowment is an endowment assurance under which the amount payable on maturity is twice the amount payable on death within the policy term.
CLAIMS & POLICY MECHANICS
Double indemnity is an insurance plan provision whereby benefits are doubled in case of a particular contingency, such as in the event of death caused by accident.
CLAIMS & POLICY MECHANICS
Dual insurance is a term used to describe situations in which there are two or more policies in force covering the same risk.
LIABILITY INSURANCE
Duty of care is a legal obligation to avoid actions or omissions that could injure others or damage their property.
Read the full definition of Duty of care >UNDERWRITING & DISCLOSURE
Duty of disclosure is an insurance obligation requiring parties seeking cover to disclose material facts that may affect underwriting or policy terms.
Read the full definition of Duty of disclosure >EMPLOYEE BENEFITS & PENSIONS
Early retirement age is an age at which the employee is permitted to retire (normally earlier than the normal retirement age although may be with reduced qualification criteria); benefits would typically be reduced.
NATURAL CATASTROPHE & WEATHER
Earthquake is a sudden violent shaking of the ground that results from the seismic waves created when the earth’s crust convulses.
BANKING & FINANCIAL SERVICES
E-banking is another term for internet banking.
LIFE & HEALTH INSURANCE
Educational Endowment Assurance is an endowment assurance on the life of the parent with the benefits payable in instalments over the schooling period of the child.
NATURAL CATASTROPHE & WEATHER
EF scale is another term for Enhanced Fujita scale.
PROPERTY INSURANCE
Cover against damage to or loss of electronic processing equipment, software and data.
The scope of cover usually includes damage or loss resulting from perils such as mechanical and electrical breakdown.
LIFE & HEALTH INSURANCE
Embedded Value is the sum of a life assurance operation’s adjusted net asset value, plus the value of policies in force, less the cost of maintaining its solvency margin.
EMPLOYEE BENEFITS & PENSIONS
The umbrella under which a range of employee benefits (such as retirement pensions, personal insurances and savings and investment programmes) are grouped together and provided to all employees that are a member of the plan.
EMPLOYEE BENEFITS & PENSIONS
Employee contributions are employee benefit plan contributions made by the employee (may or may not be required as a prerequisite for participation).
LIABILITY INSURANCE
Employee dishonesty insurance is another term for fidelity insurance.
LIABILITY INSURANCE
Employers’ liability is insurance that protects employers against claims from employees for work-related bodily injury or occupational disease.
Read the full definition of Employers’ liability (EL) >LIABILITY INSURANCE
Employment practices indemnity (EPI) is another term for employment practices liability.
LIABILITY INSURANCE
Cover to protect an employer (the insured) against claims from its employees or prospective employees in relation to violations in the employment process and employment practices.
Such violations might include harassment or discrimination of any kind, wrongful dismissal, wrongful failure to employ, and wrongful failure to promote. Employment practices liability may be added to a directors’ and officers’ liability policy or combined with professional liability or fidelity insurance. Cover can be extended to include claims from contractors and consultants.
LIFE & HEALTH INSURANCE
Endowment Assurance is a policy for a fixed period under which the sum assured is payable at the end of the period (the maturity date) or upon the earlier death of the life assured.
NATURAL CATASTROPHE & WEATHER
The Enhanced Fujita scale, implemented in 2007, extends the Fujita scale that was introduced in 1971.
The enhanced scale still uses the original Fujita scale values, although these are titled EF0 to EF5 rather than F0 to F5. In addition to this, the Enhanced Fujita scale uses extra calculations for wind and damage and attempts to standardise allocations of the scale values by taking account of differences in buildings structures and standards, and different types of vegetation.
LIABILITY INSURANCE
Environmental impairment liability is insurance that covers legal liability and clean-up costs arising from pollution-related injury or property damage.
Read the full definition of Environmental impairment liability (EIL) >PROPERTY INSURANCE
Equipment breakdown insurance is commercial cover that protects against loss or damage caused by mechanical, electrical or other equipment failures.
Read the full definition of Equipment breakdown insurance >LIFE & HEALTH INSURANCE
A policy that guarantees a small annual return on the cash value through investments in fixed-income instruments and, potentially, an additional annual return through equity index derivatives.
Unlike variable universal life, the product guarantees that market fluctuations will not cause the cash balance to decline.
LIABILITY INSURANCE
Errors and omissions insurance is professional liability cover that protects professionals against claims arising from mistakes, negligence or inadequate work.
Read the full definition of Errors and omissions insurance (E&O) >INTERNATIONAL INSURANCE & REGULATION
Establishment business is an insurance term that denotes business that companies acquire in other territories as a result of having established local agency, branch or subsidiary operations or associated companies in those territories.
INTERNATIONAL INSURANCE & REGULATION
Denotes those European Union (EU) member states that have replaced their national currency with the euro (EUR) since its introduction in 1999.
At present, the euro area comprises Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain, all of which have currency issuing rights. The euro is also used in Monaco, San Marino and Vatican City, which have negotiated formal agreements with the EU to use the euro and mint their own coins. Andorra, Kosovo and Montenegro have formally adopted the euro as their sole currency but have no issuing rights.
The euro area integrates the economies of its members but is governed independently by the Eurosystem, comprising the European Central Bank (ECB) and the national banks of all euro area states. The Eurosystem defines the euro area’s monetary policy, whilst economic policy remains largely in the hands of the independent members (with euro area-wide co-ordination).
INTERNATIONAL INSURANCE & REGULATION
Euroland is another term for euro area.
INTERNATIONAL INSURANCE & REGULATION
The European Economic Area (EEA) comprises all 27 EU member states as well as Iceland, Liechtenstein and Norway.
The EEA Agreement, which has been in effect since 1994, allows the EEA-EFTA states to participate in the EU’s Internal (Single) Market and in any programmes and agencies relevant to the internal market but withholds their right to vote in these fora. The EEA Agreement is concerned principally with the four basic pillars of the internal market: the freedom of movement of goods, services, persons and capital, and the EEA adopts EU legislation in these areas. EEA states are consulted by the European Commission prior to the drafting of legislation and all new EU legislation which concerns an area covered by the EEA Agreement is integrated into these states’ national legislation.
INTERNATIONAL INSURANCE & REGULATION
Founded in 1960 by the Stockholm Convention, the European Free Trade Association (EFTA) is an intergovernmental economic organisation which was established for the promotion of free trade and economic co- operation and integration between member states.
The association was founded by several states which later joined the European Community (now European Union) and today comprises Iceland, Liechtenstein, Norway and Switzerland. EFTA works in close cooperation with both the European Union and beyond Europe’s borders, with free trade agreements now extending as far as Asia and the Americas.
INTERNATIONAL INSURANCE & REGULATION
Eurozone is another term for euro area.
LIFE & HEALTH INSURANCE
The medical evidence, such as a proposal form from the assured, a private medical attendant’s report (PMAR) from the GP in the UK or an attending physician’s statement (APS) in North America, a medical examiner’s report (MER) from an independent examiner and any other health documents/examinations that the life insurer requires to assess the risk.
CLAIMS & POLICY MECHANICS
With regard to payment, ex gratia signifies that payment has been made out of goodwill or moral obligation rather than any technical contractual or legal requirement.
In insurance terms, ex gratia payments are usually claims payments paid by insurers.
PROPERTY INSURANCE
Excepted perils is another term for excluded perils.
POLICY WORDING & COVERAGE
In insurance, ‘exception’ is normally used interchangeably with the term ‘exclusion’.
It is sometimes used in its more general sense, however; for example, as an exception to a policy condition or provision. It may even be used to indicate an exception to an exclusion in an insurance policy.
CLAIMS & POLICY MECHANICS
An excess is the part of an insured loss that the policyholder must pay before the insurer contributes to the claim.
Read the full definition of Excess >POLICY WORDING & COVERAGE
Excluded losses is another term for excluded perils.
PROPERTY INSURANCE
Excluded perils is an insurance term that refers to those perils that are declared in an insurance policy as specifically not covered by that policy.
POLICY WORDING & COVERAGE
A provision of an insurance contract that states that cover is not provided in respect of explicitly specified hazards, property or persons, or in particular situations through which a loss may be incurred.
Exclusions may be general or may apply only to specific sections of the contract, and the precise wording of the policy is very important in determining whether an exclusion applies in the event of a given loss. Exclusions are used where certain risks or aspects of a risk are considered uninsurable or entail special treatment. They are commonly used in property ‘all risks’ policies, where the scope of cover is defined by the exclusions to ‘all’ the risks covered.
INSURANCE DISTRIBUTION
Exclusive agent is another term for agent, tied.
LEGAL & DISPUTE RESOLUTION
Exemplary damages is another term for punitive damages.
FINANCIAL & ACCOUNTING TERMS
Expense ratio is an insurance term that refers to ratio of acquisition and administration expenses incurred to premium earned in respect of a particular class of business.
RISK & EXPOSURE
Exposure is the degree to which an insured risk or portfolio may be affected by a loss event.
Read the full definition of Exposure >CLAIMS & POLICY MECHANICS
Extended discovery period is another term for extended reporting period.
CLAIMS & POLICY MECHANICS
A provision under a claims-made policy for a set period of time following the expiration of the policy during which the insured can still make claims pertaining to losses that occurred during the policy period.
The extended reporting period extends the length of time that the policy covers rather than providing any additional or different conditions of cover.
NATURAL CATASTROPHE & WEATHER
F scale is another term for Fujita scale.
EMPLOYEE BENEFITS & PENSIONS
Family allowance is an insurance term that refers to benefits provided under social security systems that provide financial support for families with one or more children.
LIFE & HEALTH INSURANCE
A decreasing term insurance under which an annual sum is payable on the death of the life insured within the policy term for the remaining part of that term.
For example, the benefit may be £1,000 per year for 21 years giving an initial cover of £21,000, reducing to £1,000 in the final policy year. The amount of cover decreases by £1,000 per year and if the life insured survives the term, the policy runs out and no benefit is payable.
ISLAMIC INSURANCE
Family takaful is another term for takaful, family.
INSURANCE DISTRIBUTION
Fees are fixed charges made by a professional individual, company or organisation in return for the provision of professional advice or services.
In the insurance industry, fees usually relate to the remuneration paid by either an insurer or an insured to an intermediary for placing and handling insurance business. Unlike commission payments, fees are paid independently of premium.
LIABILITY INSURANCE
Fidelity insurance is commercial insurance that protects organisations against financial loss caused by employee dishonesty or fraud.
Read the full definition of Fidelity insurance >INTERNATIONAL INSURANCE & REGULATION
A system in which insurers file new policy wordings and/or key amendments to existing policy wordings with the appropriate regulator for approval and may then begin to use these new or amended wordings provided that the regulator has raised no questions or concerns within a set time period following the time that the wordings were filed, for example 30 days.
EMPLOYEE BENEFITS & PENSIONS
An employee’s salary upon which benefits are determined.
Final pensionable salary is usually based on the historical pensionable salary(ies) of the employee and a range of definitions prevail, such as the best three career pensionable salaries, career average salary, or average salary over the three, five or ten years immediately preceding retirement.
EMPLOYEE BENEFITS & PENSIONS
A final salary scheme is a defined benefit pension scheme where retirement benefits are based on salary and service.
LIABILITY INSURANCE
In insurance terms, the first party typically refers to the insurer.
In certain circumstances, however, such as a ‘first party insurance’; the term first party denotes the insured.
MARINE & CARGO INSURANCE
A ship’s flag indicates the country or territory in which that ship is registered and consequently the territory or country that is responsible for the ship’s safety standards and any applicable taxes and wage levels.
Some shipowners register their ships in territories or countries other than those of which they are a citizen and thereby receive the flag of their chosen territory or country as a ‘flag of convenience’. They can only do this if the territory or country in which they wish to register their ship allows them to do so and if their own territory or country allows them to register elsewhere. The reasons for registering elsewhere usually concern paying lower taxes and wages to workers. Underwriters insuring ships and cargo carried on ships tend to consider the risk to be higher on ships carrying a flag of convenience.
MARINE & CARGO INSURANCE
Flag of vessel is another term for flag of convenience.
PROPERTY INSURANCE
Flexa is an insurance peril group that covers fire, lightning, explosion and aircraft-related damage.
PROPERTY INSURANCE
Flexa insurance is a property insurance covering Flexa perils.
EMPLOYEE BENEFITS & PENSIONS
An arrangement that provides the employee with a choice of benefits from a predetermined list.
A core selection of benefits may be compulsory (for example, the employer pension plan), and, in addition, each employee may select benefits from the predetermined list up to the individual benefit value ceiling. The predetermined list may include cash, discount vouchers, vacation trading, and savings and investment programmes, as well as health and welfare benefits such as personal insurances and wellness programmes. May also be known as a cafeteria plan.
LIFE & HEALTH INSURANCE
An endowment policy which provides guaranteed surrender values after a defined number of years e.g. ten, to allow the whole or part of the policy to be encashed.
This is for tax planning in the UK and conditions will vary in other countries.
NATURAL CATASTROPHE & WEATHER
The natural phenomenon of a large volume of water overflowing onto dry land.
Flooding may be caused by a river, reservoir or lake overflowing and the breaking of flood defences such as levees, or from a sea storm or excess rainfall, which can lead to a large volume of water falling directly onto saturated land.
PROPERTY INSURANCE
Flood insurance is property insurance that covers loss or damage caused by flooding.
Read the full definition of Flood insurance >NATURAL CATASTROPHE & WEATHER
Forest fire is another term for wildfire.
CLAIMS & POLICY MECHANICS
Similar to a deductible or excess in that it refers to the portion of an insured loss borne by the insured (rather than the insurer) and may be arranged as an agreed amount or an agreed percentage of the policy limit.
A franchise differs from a deductible or excess, however, in that once the amount or percentage level is exceeded, the insurer becomes liable to pay the entirety of the claim (rather than just that part that exceeds this level, as with a deductible or excess arrangement).
LIFE & HEALTH INSURANCE
The maximum amount of death or disability cover which an insurer covering a group is prepared to insure for each individual without production of any evidence of health (except perhaps an “actively at work” certificate).
Otherwise known as non-evidence limit.
INTERNATIONAL INSURANCE & REGULATION
Freedom of establishment is an EU insurance concept that allows authorised insurers to conduct business in other EEA states through local operations.
Read the full definition of Freedom of establishment >INTERNATIONAL INSURANCE & REGULATION
Freedom of services (FOS) is another term for freedom to provide services.
INTERNATIONAL INSURANCE & REGULATION
Freedom to provide services is an EU insurance concept that allows authorised insurers to write cross-border business in other EEA states without establishing local operations.
Read the full definition of Freedom to provide services (FOS) >MARINE & CARGO INSURANCE
May refer to goods transported in bulk by air, rail, road or water (and in this sense is synonymous with ‘cargo’), or to the transportation of such goods.
In insurance circles, the term ‘freight’ is more likely to be used in reference to the cost of the transportation of goods or to the remuneration paid to the carrier (e.g. shipowner) for the transportation of goods, including the profit that the carrier derives from carrying his own goods but not any payment received for transporting other people’s goods or payment from passengers.
MARINE & CARGO INSURANCE
A person or party that arranges overseas shipments of goods.
Freight forwarders are responsible for goods from the point of origin to the final destination but they do not usually take possession of those goods at any point.
MARINE & CARGO INSURANCE
Freight forwarders’ liability is insurance that covers a freight forwarder’s legal liability for loss or damage to goods in transit.
Read the full definition of Freight forwarders’ liability >MARINE & CARGO INSURANCE
A form of cover designed to cover the insurable interest of a cargo owner in the goods that the cargo owner owns, or to cover the insurable interest of a shipowner in the goods that the shipowner is transporting.
Either way it is a contract to cover either party’s interest in the goods arriving at their destination at the right time and in the right condition; it is not a contract to cover the goods themselves (or rather, loss of or damage to them). Freight insurance relates to the insurance of ‘freight’ in its original sense, i.e. the cost of the transportation of goods or to the remuneration paid to the carrier (e.g. shipowner) for the transportation of goods, including the profit that the carrier derives from carrying his own goods but not any payment received for transporting other people’s goods or payment from passengers.
INTERNATIONAL INSURANCE & REGULATION
Frontier business is another term for cross-border business.
GLOBAL PROGRAMMES & CROSS-BORDER COVER
Fronting is an international insurance arrangement where a locally admitted insurer issues a policy while transferring much of the risk to another insurer or reinsurer.
Read the full definition of Fronting >NATURAL CATASTROPHE & WEATHER
The Fujita scale is named after meteorologist and researcher Tetsuya Fujita.
The scale was introduced in 1971 and became used as an official classification system for assessing the damage caused by tornados as of the mid-1970s. It measures the intensity of a given tornado not by wind speed but by assessing the damage that the tornado causes to man-made structures. Damage is assessed after the tornado event, whereupon a Fujita scale ‘value’ is assigned to the event and wind speed estimated accordingly. Fujita scale values range from F0 (gale) to F5 (incredible), and F6 (inconceivable) is also sometimes included in the scale.
NATURAL CATASTROPHE & WEATHER
Fujita scale values are the values assigned to tornado events under the Fujita scale, which measures the intensity of a given tornado by assessing the damage that the tornado causes to man-made structures.
Fujita scale values are as follows:
- F0 (gale) - would typically result in damage to chimneys and sign boards.
- F1 (moderate) - could overturn mobile homes and caravans and lift up roof tiles and surfaces.
- F2 (strong) - would cause significant damage, such as tearing off the roofs and walls of frame houses, lifting cars into the air and uprooting large trees.
- F3 (severe) - can cause similar damage to an F2 tornado but would uproot most trees, including forest trees, and tear off the roofs and walls of well constructed houses as well as overturning trains and cars.
- F4 (devastating) - can level well-constructed houses, throw cars considerable distances, uproot large trees, and generate airborne debris that becomes deadly projectiles.
- F5 (incredible) - can cause damage to steel-reinforced concrete structures and lift and throw strong frame houses. Very rare.
- F6 (inconceivable) - has never been recorded and would be all but impossible to distinguish from the destruction caused by F4 or F5 tornados. The F6 value has been called a hypothetical modification of the Fujita scale.
EMPLOYEE BENEFITS & PENSIONS
Full orphan is the term for a child (or adult) where both parents are deceased.
EMPLOYEE BENEFITS & PENSIONS
A fully insured scheme is a pension arrangement where trustees use insurance policies to guarantee member benefits under the scheme rules.
MARINE & CARGO INSURANCE
General average is another term for average, general.
LEGAL & DISPUTE RESOLUTION
Gentlemen’s agreement is an arrangement that is based on trust rather than binding under law.
NATURAL CATASTROPHE & WEATHER
A term used to group together natural hazards that occur due to geological causes, such as tectonic plate shifts.
Geological hazards include earthquakes, volcanic eruptions, landslides, avalanches and rock falls.
MOTOR INSURANCE
A document that provides evidence of motor insurance cover for drivers driving outside their country of domicile within and around Europe.
Green cards are not a form of insurance cover but provide proof that the driver has sufficient insurance cover. Green cards form part of the Green Card system, which is intended to facilitate border-crossing. A Green Card is not necessary for border-crossing within the European Union and certain other European countries.
LIFE & HEALTH INSURANCE
Group insurance is insurance arranged for a group of people under a single policy, often provided through an employer or association.
Read the full definition of Group Insurance >LIFE & HEALTH INSURANCE
A life insurance policy covering a group of people as distinct from individual lives.
The group must exist for some purpose other than the effecting of the insurance e.g. employees in a company or a particular part of the company or members of an association. The cover is most often provided as an ancillary benefit to a pension scheme but can be provided without any accompanying pension benefits. Most policies are written on the basis of one-year term assurance with the automatic right of renewal each year subject to the terms of the contract.
LEGAL & DISPUTE RESOLUTION
Group litigation is another term for class action.
FINANCIAL & ACCOUNTING TERMS
Group Premium Rating (or Manual Group Premium Rating) is an insurance term that refers to similar units of exposure are grouped together in order that the risk premium to be applied to the group.
LIFE & HEALTH INSURANCE
A private medical insurance plan that is offered on a group basis to all or a selection of employees, and is arranged by the employer.
A group plan may include the employee’s dependants and may be provided on a contributory or non-contributory basis (for personal and/or dependant cover). Group plans are commonly more flexible in the treatment of waiting periods and pre-existing conditions.
LIFE & HEALTH INSURANCE
An annuity that prescribes certain guarantees, such as a guaranteed level of income (for example, a flat rate or an inflation adjusted benefit), a guaranteed payment period (for example, lifetime or a minimum term) or a combination of guarantees.
INVESTMENT & SAVINGS PRODUCTS
Guaranteed Bonds is an insurance term that refers to life policies, normally paid by a single premium and for a fixed term, which guarantee certain benefits.
INVESTMENT & SAVINGS PRODUCTS
Schemes to assist elderly homeowners to raise loans on their property for the purpose of purchasing immediate annuities in order to increase their income.
The loan (usually for up to 80% of the house value) is provided by an insurance company or building society on the security of the property. For a couple, the money would be invested in a joint life and survivor annuity.
LIFE & HEALTH INSURANCE
A health policy that pays a fixed (usually daily) sum whilst the insured is admitted to hospital.
Admittance may be for any reason but the policy can be restricted to accident only.
LIFE & HEALTH INSURANCE
Life assurance may be used in a variety of ways in connection with house purchase, for example as an endowment mortgage, a low cost endowment mortgage (also known as a bonus reinforcement policy) or a decreasing term assurance.
EMPLOYEE BENEFITS & PENSIONS
Hybrid is an employee benefits structure where benefits are determined using a combination of a defined benefit basis and defined contribution basis.
LIFE & HEALTH INSURANCE
An annuity that usually commences payments to the annuitant at the end of the first interval.
If the annuity is payable quarterly this means that the first payment will be three months after payment of the purchase price. Immediate annuities are always bought by a single premium (known as the purchase price).
LIFE & HEALTH INSURANCE
Income benefit is a recurring payment made under a life or family income benefit policy after a qualifying death or insured event.
LIFE & HEALTH INSURANCE
Income drawdown is an insurance term that refers to one method by which income is payable from a pension plan.
LIFE & HEALTH INSURANCE
An insurance plan that provides a prescribed level of salary replacement (typically inclusive of state and compulsory benefits) on the occurrence of an insured event, such as disablement and sickness (previously known as permanent health insurance).
Benefits may be paid to the employer or direct to the employee.
EMPLOYEE BENEFITS & PENSIONS
Income test is the test applied to the employee’s prescribed income in order to determine whether the employee qualifies for benefits (may reduce the amount of benefits payable).
EMPLOYEE BENEFITS & PENSIONS
Increases to pensions in payment is an increase in the amount of a pension payment that occurs after the pension payments have commenced.
LIFE & HEALTH INSURANCE
A term (temporary) insurance particularly suitable for individuals uncertain as to their future life insurance requirements.
In one policy the life insured gains maximum cover, maximum flexibility, and protection against inflation at modest cost. It is written as a fixed term (usually five years) policy with the following options, which are available to the policyholder without further evidence of health or sum assured justification:
Renewal Option – to extend the policy beyond the original term at the rates applicable for new business at that time
Increase Option – when the option is effected the sum insured can be increased by up to 50%
Conversion Option – conversion in whole or part to whole life or endowment assurance at any time during the original term but usually not later than age 60.
CLAIMS & POLICY MECHANICS
An indemnity policy is an insurance policy that pays out in the event of a claim in accordance with the principle of indemnity.
An insured may have one or more indemnity policies in force for the same risk but the principle of indemnity (and related principle of contribution) precludes the possibility that the insured can gain financially from a loss by claiming for the same loss under one or more insurance policies.
CLAIMS & POLICY MECHANICS
The principle of indemnity is an insurance principle that restores the insured to their financial position before a covered loss.
Read the full definition of Indemnity, principle of >INSURANCE DISTRIBUTION
Independent agent is another term for agent, independent.
INSURANCE DISTRIBUTION
Indirect marketing is a method of marketing that involves insurance intermediaries.
These intermediaries may be tied, i.e. work for only one insurance company and therefore sell only that company’s products, or may be independent, and therefore able to offer a wide variety of products from a number of different insurers. The responsibilities of the insurer and the intermediary towards consumers in indirect marketing arrangements can vary significantly depending on the arrangement in place.
LIFE & HEALTH INSURANCE
The business of effecting life assurance, the premiums in respect of which are received by means of collectors, at intervals usually of less than two months.
The most distinctive feature is the employment of agents (home service representatives) to collect premiums from the homes of the policyholders.
CLAIMS & POLICY MECHANICS
Insurable interest is the legal or financial relationship that gives a person or organisation the right to insure a risk.
Read the full definition of Insurable Interest >POLICY WORDING & COVERAGE
Insurance rider is a type of insurance that additional cover for a specified risk provided under a stand-alone insurance plan.
EMPLOYEE BENEFITS & PENSIONS
Insured pension plan is a plan that is funded through contracts with a life insurance company.
PROPERTY INSURANCE
Insured perils is another term for named perils.
BANKING & FINANCIAL SERVICES
A banking service that allows customers to conduct banking transactions through the internet, or ‘online’, through their bank’s website.
Such transactions can include opening a bank account, moving money, paying bills and setting up payments.
INVESTMENT & SAVINGS PRODUCTS
Investment Bond is a unit-linked single premium bond.
ISLAMIC INSURANCE
Islamic insurance is another term for takaful.
LIFE & HEALTH INSURANCE
Joint life insurance is life insurance covering two or more lives, usually paying on the first death or the last death.
MOTOR INSURANCE
Kasko is another term for motor casco.
LIFE & HEALTH INSURANCE
A life or accident or health insurance effected by a business on a person whose death or disablement would adversely affect the profitability of the business.
In theory an employer’s interest in the life of an employee is limited to the employee’s salary for the period of notice, but in practice insurers are prepared to issue policies on key employees for far greater sums. The policy sum then compensates for such items as: loss of custom, abandoned projects, restarted projects, cost of recruitment and training and diminution in profits following the interruption caused by death or disablement.
INTERNATIONAL INSURANCE & REGULATION
The Conference Interafricaine des Marches d’Assurances (CIMA) is an organisation of 14 francophone west African states that have agreed to an integrated organisation of the insurance industry through common regional insurance legislation known as the CIMA Code and a common regulatory authority, the Regional Commission of Insurance Control (Commission Regionale de Controle des Assurances - CRCA).
The CIMA Treaty was signed in 1992 and the code came into effect in 1996. The current CIMA member states are: Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Equatorial Guinea, Gabon, Guinea- Bissau, Ivory Coast, Mali, Niger, Republic of the Congo, Senegal and Togo. Comoros signed but has yet to ratify the CIMA Treaty.
LIFE & HEALTH INSURANCE
Last Survivor Assurance is a life assurance on two or more lives under which the sum assured is payable on the last death.
EMPLOYEE BENEFITS & PENSIONS
Late retirement age is an age at which the employee is permitted to retire, up to which benefits are increased due to retirement after the normal retirement age.
LIABILITY INSURANCE
Liability insurance is cover that protects an insured against legal responsibility for injury, damage or financial loss caused to third parties.
Read the full definition of Liability insurance >LIFE & HEALTH INSURANCE
Life annuity is an annuity that is payable for life.
LIFE & HEALTH INSURANCE
Life Assurance/Insurance is a policy under which an insurer agrees to pay a claim contingent upon the death or survival of human life, in consideration of payment of a single or regular premiums.
LIFE & HEALTH INSURANCE
Life of Another Policy is a life policy taken out by one person on the life of another in whom he or she has an insurable interest.
CLAIMS & POLICY MECHANICS
Limit of indemnity is another term for limit of liability.
CLAIMS & POLICY MECHANICS
A limit of liability is the maximum amount an insurer will pay for a covered claim or series of claims under a policy.
Read the full definition of Limit of liability >CLAIMS & POLICY MECHANICS
The aggregate limit of liability, also known as the aggregate limit of indemnity or aggregate limit, outlines the maximum amount that the insurer will pay for multiple losses under a given policy during a set time period, for example the currency of the policy or one year.
It seeks to limit the liability of the insurer and may apply to a specific type of coverage or to all losses under the policy.
INSURANCE MARKET CLASSIFICATION
Line of business is another term for class of business.
INVESTMENT & SAVINGS PRODUCTS
Investment schemes offered by life insurers in which premiums paid by the policyholders as investors are used partly to purchase life insurance and partly to purchase units in a unit trust, or unitised fund.
The proceeds, or benefits payable, will be the greater of the guaranteed sum insured or the value of the units accrued.
LIFE & HEALTH INSURANCE
An insurance that, in return for a regular premium or a single premium, will meet all or part of the cost of personal and nursing care consequent upon the insured event.
A policy dedicated to funding long-term care has proved popular with elderly people in the USA and is now available elsewhere. Alternatively, cover can sometimes be added to an existing life policy. Policies can cover care provided by institutions or in the insured home.
The insured event is a disability that may be defined as “professional opinion is that the insured is in need of care”. Alternatively the benefit may become payable at a specified level of disability with claims being based on the care needed in connection with the activities of daily living (ADLs), e.g. bathing, dressing, using the toilet, continence, getting into or out of bed and eating and drinking. If the assured needs assistance with, for example, any three of these ADLs, the benefit becomes payable.
EMPLOYEE BENEFITS & PENSIONS
Long-term disability is an assessed disability, disease or illness that usually lasts for at least two years.
EMPLOYEE BENEFITS & PENSIONS
An insurance plan that provides a prescribed level of salary replacement on the occurrence of an insured event, such as disablement and sickness.
Benefits may be payable as a lump sum. A long-term disability insurance plan would typically have stricter qualification criteria in comparison to an income protection insurance plan or salary continuance insurance plan.
EMPLOYEE BENEFITS & PENSIONS
Long-term business usually written in the life department.
Known as PHI in the UK, it is called long term disability (LTD) in North America and other US influenced markets. The principle benefit is an income for the insured during periods of disablement from working. The insured effects the policy for a given period (e.g. to age 60 or 65) and provided always that the premium is paid the insurer remains on risk for the entire period regardless of any changes in the state of health of the insured. Once the benefit commences it continues to be payable for so long as the incapacitating illness or accident continues, up to the fixed age.
Health, gender, smoking habits and age at entry are key underwriting factors. The level premium system operates and, in order to minimise costs, many insureds opt for deferred periods ranging from four weeks to 52 weeks or even longer. With long deferred periods the insurance becomes cover against the catastrophic disablement risk. Policies are issued both to individuals and to employers who wish to effect group cover for their employees.
CLAIMS & POLICY MECHANICS
A loss adjuster is a claims professional who investigates losses and advises insurers on policy liability and claim settlement.
Read the full definition of Loss adjuster >CLAIMS & POLICY MECHANICS
A claims expert who is appointed to assess, prepare and negotiate a claim and settlement with an insurer on the insured’s behalf.
Loss assessors are appointed and paid by insureds to act in their interests (i.e. unlike loss adjusters, they are not independent). The fees paid to a loss assessor may not form part of the insured’s claim. Loss assessors are sometimes referred to as public loss assessors.
CLAIMS & POLICY MECHANICS
Losses-occurring is a liability policy basis that covers losses occurring during the policy period, regardless of when the claim is made.
Read the full definition of Losses-occurring >LIFE & HEALTH INSURANCE
An endowment assurance, usually established to repay a house purchase loan, under which the initial sum assured is less than the loan to be repaid.
The insurance company will assume that bonuses will be paid in the future to make up the difference at maturity and will guarantee the full repayment of the loan on early death by the attachment of a decreasing term insurance designed to reduce as bonuses build up. Problems will arise if future bonuses are paid at a level less than assumed, as the endowment assurance maturity value will not repay the loan in full.
LIFE & HEALTH INSURANCE
Low start endowment assurance is an endowment policy with lower initial premiums that increase in later years.
INVESTMENT & SAVINGS PRODUCTS
A unit-linked fund in which transactions in the underlying assets are made upon the decision of the fund manager.
Normally the fund managers invest in a spread of all types of assets (e.g. equities, bonds, property and cash) as opposed to a specified type of asset, though the geographical area is normally limited (e.g. a UK managed fund).
FINANCIAL & ACCOUNTING TERMS
Manual or Group Premium Rating is an insurance term that refers to similar units of exposure are grouped together in order that the risk premium to be applied to the group.
FINANCIAL & ACCOUNTING TERMS
The margin of solvency for long-term business varies according to the class of business.
Where more than one class is involved, the solvency margin for each class is aggregated to find the required margin of solvency.
EMPLOYEE BENEFITS & PENSIONS
An employer contribution and/or government contribution, which is required due to an employee contribution; the matching contribution may equal the employee contribution, may be a percentage of pensionable salary or may be prescribed on a matching ratio basis.
UNDERWRITING & DISCLOSURE
Material circumstance is another term for material fact.
UNDERWRITING & DISCLOSURE
A material fact is information that would influence an insurer’s decision to offer cover, set terms or calculate premium.
Read the full definition of Material fact >EMPLOYEE BENEFITS & PENSIONS
The period of leave provided to a pregnant employee and/or new mother covering the time of confinement and a certain period of time after the birth.
In many countries this also applies to the period following the completion of an adoption.
FINANCIAL & ACCOUNTING TERMS
Mathematical Reserves is an insurance term that refers to provision made by an insurer to cover liabilities (excluding liabilities which have already fallen due) arising under, or in connection with, contracts for long-term business.
LIFE & HEALTH INSURANCE
Maturity is the end of the term of an endowment assurance.
BANKING & FINANCIAL SERVICES
M-banking is another term for mobile banking.
EMPLOYEE BENEFITS & PENSIONS
Means test is the test applied to the employee’s prescribed income and assets in order to determine whether the employee qualifies for benefits (may reduce the amount of benefits payable).
LIFE & HEALTH INSURANCE
Medical Aid Insurance is a type of insurance that also known as private medical insurance.
NATURAL CATASTROPHE & WEATHER
A 12-step scale used to measure the intensity of earthquake events on the basis of three factors: effects perceived by people; damage caused to buildings; geological changes, underground and to water systems.
These three factors are measured in the area surrounding an earthquake’s occurrence and, if there is any discrepancy between the scale values assigned to two or more of the three factors of measure, the “damage caused to buildings” factor predominates, as the assessment of damage to buildings is the primary objective of the MSK scale. The “effects perceived by people” factor is the only one used for the first four values on the MSK scale (I to IV) because this is held to be the only way to measure seismic intensity at such a low level.
The scale was developed in the 1960s and is still in use in many former Soviet Union countries and in India.
NATURAL CATASTROPHE & WEATHER
Medvedev-Sponheuer-Karnik scale values are the values assigned to earthquake events under the Medvedev-Sponheuer-Karnik scale, which measures seismic intensity.
The scale values are as follows:
- I (not noticeable) - this level of seismic activity is detectable only by seismographs.
- II (scarcely noticeable) - noticeable to only a few people who are at rest inside buildings at the time of the earthquake event.
- III (weak, partially observed only) - only noticed by a few people who are inside buildings.
- IV (largely observed) - felt by many people in buildings and by a few outside. Windows and free-standing objects would rattle and hanging objects sway.
- V (awakening) - the first level of the scale that takes account of factors beyond human perception. Most people, both in buildings and outside, would feel an earthquake of this level. Buildings tremble and unstable objects may overturn or move. Slight damage to some buildings of rural, clay or adobe structure.
- VI (frightening) - many people would run outside. Slight damage to many rural, clay or adobe constructions and to a few brick, stone and prefabricated buildings. Some rural structures may also sustain more moderate damage, such as cracks in chimneys. Gaps of up to one cm may be detectable in wet ground.
- VII (damage to buildings) - people experience difficulty standing. Many reinforced and well constructed wooden buildings sustain minor damage, brick structures are moderately damaged, and rural structures start to collapse. Waves form on water.
- VIII (destruction of buildings) - fright and panic. Rural buildings collapse partly or entirely and some reinforced buildings sustain heavy damage. Branches break off from trees and stone walls collapse. Gaps of several centimetres appear in the ground and water levels and flows change.
- IX (general damage of buildings) - considerable panic. Damage to roadways and underground pipes, destruction of brick buildings, and heavy damage to reinforced structures. Landslides, large waves on water, cracks in the ground exceeding 10cm on river banks.
- X (general destruction of buildings) - partial collapse, and in some cases total destruction, of reinforced structures. Severe damage to dams and bridges. Cracks of up to one metre in the ground, landslides, and creation of new lakes.
- XI (catastrophe) - extreme damage to all types of structure, including reinforced and well constructed buildings, bridges and railway lines. Major changes to the ground surface, including land slips and rock falls. The intensity of the event requires investigation.
- XII (landscape changes) - almost all buildings heavily damaged or destroyed entirely. Considerable changes to the surface of the ground, with sizeable cracks in the ground, new waterfalls created and rivers redirected. Event requires special investigation.
BANKING & FINANCIAL SERVICES
A form of microfinance banking in which lending institutions, including financial institutions and non-governmental organisations, lend small amounts of money at low rates of interest to low-income individuals and groups to facilitate the starting-up of small businesses.
The purpose of microcredit is to provide access to basic financial services for those who would otherwise be denied credit due to a lack of credit history or banking experience or lack of collateral.
BANKING & FINANCIAL SERVICES
Microfinance is finance on a small scale.
The term encompasses several forms of ‘micro’ services, including microcredit, microsavings and microinsurance but is often used to refer to microcredit activities only.
COMMERCIAL INSURANCE
Microinsurance is insurance designed to provide affordable protection for low-income people or communities against specific risks.
Read the full definition of Microinsurance >BANKING & FINANCIAL SERVICES
A form of microfinance banking that allows low-income individuals who would otherwise be denied access to basic financial services the opportunity to open savings accounts for the purpose of setting money aside for future needs.
Microsavings accounts often entail lower minimum deposit requirements than normal savings accounts in order to make them more accessible to low-income individuals.
ISLAMIC INSURANCE
Microtakaful is takaful on a small scale, as microinsurance is insurance on a small scale.
It involves small premiums and small amounts of cover and is offered to those on very low incomes as a form of protection against damage or loss that may befall them or their business. The target market for microtakaful is workers in the informal economy and those whose income is affected by seasonal variations in employment. Microtakaful differs from microinsurance in that, like takaful, it is carried out in a way that complies with Islamic principles and sharia law.
BANKING & FINANCIAL SERVICES
A banking service that allows customers to conduct banking transactions through the internet, or ‘online’, using a mobile device such as a mobile phone.
Such transactions can include moving money, viewing statements and checking account balances. Mobile banking is normally conducted through a specialised mobile device application but may also be conducted through an optimised ‘mobile-friendly’ version of the bank’s website.
NATURAL CATASTROPHE & WEATHER
The Modified Mercalli (MM) scale, also called the Modified Mercalli Intensity (MMI) scale, measures seismic intensity (as opposed to magnitude).
Like other seismic intensity scales, the MM scale categorises earthquake events on the basis of perceivable and observable effects on people and man-made structures, as well as geological changes. Different MM scale values may be assigned to different areas affected by a single seismic event, due to the fact that the effects of a such an event will vary according to, for example, distance from the epicentre or variations in ground surface. This scale is currently used in the United States.
NATURAL CATASTROPHE & WEATHER
Modified Mercalli scale values are the values assigned to earthquake events under the Modified Mercalli scale, which measures seismic intensity.
The scale values are as follows:
I - this level of seismic activity may be felt but only by very few people and under highly favourable conditions.
II - felt by a few people who are at rest.
III - noticed by people who are inside buildings but many people may not identify the event as being an earthquake.
IV - felt by many people in buildings and by a few outside. Suspended objects swing and windows and dishes are disturbed.
V - felt by almost everyone. Windows and dishes break and small objects move.
VI - an event of this intensity would be felt by everyone. Furniture moves and buildings are likely to sustain slight damage, such as falling plaster and damage to chimneys.
VII - most people would be frightened by the event. Slight damage to well constructed buildings but considerable damage to poorly built structures, including chimney collapse.
VIII - collapse of walls, monuments and statues, and severe damage to buildings of poor construction. Heavy furniture moved and overturned.
IX - landslides, buildings moved from their foundations, considerable damage to well constructed buildings.
X - most building foundations destroyed. Rock falls, avalanches, landslides and large cracks in the ground.
XI - almost total destruction, with few buildings leftstanding. Bridges destroyed.
XII - total destruction. Objects thrown into the air.
EMPLOYEE BENEFITS & PENSIONS
A pension scheme under which an individual member’s benefits are determined by contributions paid into the scheme in respect of that member, usually increased by an amount based on the investment return on those contributions, with an allowance for expenses.
LIFE & HEALTH INSURANCE
Morbidity Table is a table constructed from past knowledge of disabilities occurring at each age, to assist an actuary to construct premiums for permanenthealth insurance/long-term disability (PHI/LTD) or private medical insurance (PMI).
LIFE & HEALTH INSURANCE
An instrument by which the probabilities of life and probabilities of death can be measured.
The basis is the ratio, for a particular age, of the number of persons dying at any age to the number of persons alive at the beginning of the year. Mortality and interest rate factors enable actuaries to produce life assurance basic risk premium calculations.
LIFE & HEALTH INSURANCE
The name often applied to a decreasing term assurance used to cover the amount outstanding at any time during the period of an ordinary repayment mortgage.
In the event of death before repayment of the mortgage the sum payable should be sufficient to clear the loan. The reductions in the sum insured are designed to fall in line with the reductions in the amounts of outstanding debt as repayments of capital are made over the years. If the life insured survives the mortgage period the policy comes to an end and there is no return of premium. The reductions in the early years are for modest amounts as very little capital is repaid in those early stages.
MOTOR INSURANCE
Motor casco is a form of voluntary motor own damage insurance that covers damage to the vehicle itself resulting from such causes as traffic accidents, natural catastrophes, vandalism and glass breakage, as well as theft of the motor vehicle.
ISLAMIC INSURANCE
Mudaraba is a form of joint venture in takaful or Islamic insurance between the contribution-paying members (policyholders) and the takaful operator (operating on behalf of the founder members/ shareholders).
The sharing arrangements between the members and the takaful operator are agreed in advance but may be varied annually or periodically subsequent to agreement as between the parties. The muduraba system is most commonly used to share investment income and implies the sharing of fortunes between the takaful operator and the members in pre-agreed proportions.
PROPERTY INSURANCE
Named perils is property insurance that covers only the specific causes of loss listed in the policy.
Read the full definition of Named perils >FINANCIAL & ACCOUNTING TERMS
An outmoded method of charging life assurance premiums in the UK, except under group life and group permanent health insurance schemes (where it is called single premium costing).
Each premium is related to the current risk of death and therefore increases year by year. At older ages the premiums become almost prohibitive. No reserve is built up and therefore there is no surrender value.
FINANCIAL & ACCOUNTING TERMS
In a competitive business environment, long-term premium rates are based on up to date mortality tables and realistic interest rates.
The reserving basis needs to be more conservative than the premium basis and the difference, aggregated over the remaining policy term, contributes to so-called “new business strain”. In life business, new policies coming on to the books have heavy initial expenses (underwriting, policy issue costs and initial commission) which, under the net premium valuation basis, are assumed to be spread evenly over all future premiums. Consequently the calculated reserves will be higher than the available assets and new business strain results.
Zillmerisation is one method of reducing this part of new business strain by allowing, within the reserving basis, for at least part of these initial costs to be re-spread throughout the policy term. Reassurance on a risk premium basis is one possible method of mitigating the strain. Alternatively, if part of the business is reassured on the original premium basis, certain expenses (stamp duty, commission) will be shared and the reassurer may pay an overriding commission, which will contribute to the administration expenses.
EMPLOYEE BENEFITS & PENSIONS
Non-Contributory Pension Scheme is a scheme to which only the employer makes any contributions.
LIFE & HEALTH INSURANCE
Non-Evidence Limit is another term for Free Cover.
LIFE & HEALTH INSURANCE
A clause in a life policy under which the policy remains in force for a limited period after the expiry of the (usually 30) days of grace for premium payment, even though the premium remains unpaid.
The surrender value of the policy, if any, is used to keep the policy in force for a stated period (e.g. one year) or until the surrender value is exhausted, depending upon the practice of the insurer.
LIFE & HEALTH INSURANCE
The same as ordinary life assurance except that, normally, no medical examination is required.
The proposer must give the name of his or her ordinary medical attendant to whom the insurer may, with the proposer’s permission, refer if the insurer is not satisfied with the particulars supplied on the proposal form. Life assurers have their own non-medical limits expressed in terms of age and sum assured depending upon the type of policy.
LIFE & HEALTH INSURANCE
Also known as a without profits or non-participating policy.
A life assurance policy which does not participate in the distributable surplus, so that the amount payable on claim is the sum assured only. No bonuses are added.
EMPLOYEE BENEFITS & PENSIONS
Normal retirement age is an age at which the employee is permitted to retire without a reduction in benefits due to early retirement.
EMPLOYEE BENEFITS & PENSIONS
Notional defined contribution is an employee benefits structure where benefits are determined on a defined contribution basis but are financed on a pay as you go basis.
EMPLOYEE BENEFITS & PENSIONS
Occupational pension plan is an employee benefits concept that any pension plan that an employer establishes and/or contributes to on behalf of the employee.
RISK & EXPOSURE
Occurrence is a term used to describe an event that gives rise to an insured loss.
An ‘occurrence’ may denote a single event, such as an accident, or repeated or prolonged exposure to the same (harmful) conditions, or a series of (harmful) events occurring within a set time period. Occurrences are events that trigger liability policies written on a losses-occurring basis (as opposed to a claims-made basis).
BANKING & FINANCIAL SERVICES
Online banking is another term for internet banking.
LIFE & HEALTH INSURANCE
Also known as flexible endowments.
These policies are written as endowments maturing at age 65, but give early maturity options and incorporate guaranteed cash values at specific dates. The guaranteed cash value is a basic sum to which bonuses are added. Policyholders buy units paying £10 per month or multiples thereof and may also buy more units of cover without evidence of health within certain periods and limits (e.g. one additional unit for every two if effected within the first five or 10 years).
Also a policyholder who has cashed in a unit at any time can effect a new replacement unit as long as he or she is under a stated age, e.g. 55. This is called the “cash and carry option”. The unit principle enables the policyholder to acquire cash without having to surrender the whole of the contract. In effect, each unit is a separate policy and can be treated separately. The main disadvantage is that the extra life cover given through the guarantees results in a reduction in the amount of premium available for investment.
LIFE & HEALTH INSURANCE
Open Market Option is the option to use the proceeds of a pension scheme to buy an annuity at the current market rate from the insurer concerned, or from any other insurer.
PROPERTY INSURANCE
Open perils is another term for all risks.
EMPLOYEE BENEFITS & PENSIONS
Paid sickness leave is a benefit that is paid by the employer to the employee when the employee is absent due to sickness or disability.
LIFE & HEALTH INSURANCE
A policy, sometimes called a “free policy”, granted by a life insurer for a reduced amount based on premiums already paid with no further premiums payable.
The reduced sum is payable in the same event (e.g. death or survival of a given term) as the original sum. Only an endowment or whole life type of policy can be made paid-up.
LIFE & HEALTH INSURANCE
The value of a paid up policy is determined by actuarial calculation.
Under endowment or whole life policies, the reduced sum payable is sometimes that proportion of the original sum assured that the premiums paid bear to those originally payable, provided that no loan has been granted and that the policy is made paid-up within the days of grace allowed for the payment of the first unpaid premium.
EMPLOYEE BENEFITS & PENSIONS
Parental leave is the period of leave provided to the parents of a child following birth or adoption.
LIFE & HEALTH INSURANCE
Participating Policy is an alternative term for a with profits policy.
MARINE & CARGO INSURANCE
Particular average is another term for average, particular.
CLAIMS & POLICY MECHANICS
Partners and Insurable Interest is a business partner has insurable interest in the life of a co-partner to the extent of the capital invested by the co-partner in the business.
LIFE & HEALTH INSURANCE
Partnerships Insurance is the use of life insurance to protect business partners, upon the death of one of them.
EMPLOYEE BENEFITS & PENSIONS
The period of leave provided to a father following the birth of a child.
In many countries this also applies to the period following the completion of an adoption.
EMPLOYEE BENEFITS & PENSIONS
A method whereby pension scheme payments are financed as they fall due rather than by previous financial provision to build up a fund.
The state pension scheme in many countries operates in this way
LIFE & HEALTH INSURANCE
Payment period is the period of time over which a benefit is paid.
EMPLOYEE BENEFITS & PENSIONS
Pension is a series of periodic payments that form an income stream and are payable monthly or at other specified intervals.
EMPLOYEE BENEFITS & PENSIONS
Pension Fund is the assets of a pension scheme from which the pensions will be paid.
LIFE & HEALTH INSURANCE
A pension arrangement under which a proportion of the benefits can be used to repay the mortgage debt.
The remaining benefits must be in the form of a pension. In the UK tax relief will be allowable on the premiums payable to the pension arrangement, which can make the pension mortgage an attractive tax-efficient alternative to endowment or repayment mortgages.
EMPLOYEE BENEFITS & PENSIONS
Pension plan is a vehicle through which benefits accrue in order to provide a pension or lump sum to employees at a future date.
EMPLOYEE BENEFITS & PENSIONS
Pensionable salary is the part of an employee’s salary on which pension contributions (and some other employee benefits) are based.
EMPLOYEE BENEFITS & PENSIONS
Pensioner is a person in receipt of a pension.
LIFE & HEALTH INSURANCE
Long-term business written in the life department.
Known as PHI in the UK, it is called long term disability (LTD) in North America and other US influenced markets. The principle benefit is an income for the insured during periods of disablement from working. The insured effects the policy for a given period (e.g. to age 60 or 65) and provided always that the premium is paid (usually annually) the insurer remains permanently on risk for the entire period regardless of any changes in the state of health of the insured. Once the benefit commences it continues to be payable for so long as the incapacitating illness or accident continues, up to the fixed age.
Health, gender, smoking habits and age at entry are key underwriting factors. The level premium system operates and, in order to minimise costs, many insureds opt for deferred periods ranging from four to 52 weeks or even longer. With long deferred periods the insurance becomes insurance against the catastrophic disablement risk. Policies are issued both to individuals and to employers who wish to effect group cover for their employees.
PERSONAL LINES INSURANCE
Personal lines are insurance products designed to protect individuals and households rather than commercial organisations.
Read the full definition of Personal lines >CLAIMS & POLICY MECHANICS
When fixing the premium under life assurance policies, most companies incorporate a fixed annual charge on each policy known as the policy fee.
It is intended to cover the offices’ administration costs, regardless of the amount of the insurance. It varies from one insurer to another and sometimes with the type of policy. It is normally incorporated within the premium quoted rather than being shown separately.
CLAIMS & POLICY MECHANICS
Premium rate is the price charged for a unit of insurance exposure, used to calculate the premium payable.
Read the full definition of Premium rate >INSURANCE DISTRIBUTION
The party in an agency agreement that authorises the agent to act on its behalf in entering into and concluding a contract with a third party.
In insurance, the principal is typically an insurer or reinsurer and the third party the insured; the agent may be a broker or another type of insurance intermediary.
LIFE & HEALTH INSURANCE
Provides benefits for most types of medical expenses usually up to a high maximum benefit.
Such contracts often contain internal limits and may be subject to deductibles and co-insurance. A policy that provides a daily benefit (hospitalization insurance) when the insured is admitted to hospital is often included in medical insurance statistics but it is not “true” PMI.
LIABILITY INSURANCE
Product liability insurance is cover that protects businesses against claims for injury or damage caused by products they manufacture, sell or supply.
Read the full definition of Product liability insurance (PL) >LIABILITY INSURANCE
Product recall insurance is commercial cover that protects against costs arising from withdrawing defective or unsafe products from the market.
Read the full definition of Product recall insurance >LIABILITY INSURANCE
Professional indemnity insurance (PI) is another term for professional liability insurance.
LIABILITY INSURANCE
Professional liability insurance is cover that protects professionals against claims arising from negligence, errors or omissions in their services.
Read the full definition of Professional liability insurance (PL) >EMPLOYEE BENEFITS & PENSIONS
Profit sharing is an insurance term that refers to where a company shares a part of the profits (on a prescribed basis) with some or all employees.
LIFE & HEALTH INSURANCE
Programmed withdrawal is an insurance term that refers to withdrawals made on a regular basis from a pension plan.
EMPLOYEE BENEFITS & PENSIONS
Provident fund is a savings vehicle from which the value of the total accumulated fund is paid as a lump sum at maturity.
CLAIMS & POLICY MECHANICS
Public loss assessor is another term for loss assessor.
LEGAL & DISPUTE RESOLUTION
Damages awarded by a court in a liability case that are intended to punish the defendant rather than compensate the other party to the case.
For this reason, punitive damages, or “exemplary damages” as they are sometimes known, exceed the amount needed to make good the loss suffered by the party who has suffered injury, loss or damage. Some policies, particularly marine liability covers, contain exclusions in respect of this type of damages.
LIFE & HEALTH INSURANCE
An annuity purchased from an authorised insurer by an individual out of his or her own capital.
In the UK, unlike other annuities, these purchased life annuities are taxed as investments. As a result each instalment is in two parts, the capital content which is tax-free and the interest content which is treated as unearned income and taxed at source at the standard rate. The annuitant is responsible directly for any higher rate tax which may be payable.
LIFE & HEALTH INSURANCE
A life assurance policy which pays the sum assured if the life assured survives the policy term.
Premiums may or may not be returnable in the event of earlier death.
ISLAMIC INSURANCE
Qard hassan is the provision of an interest-free loan from the takaful entity founders/shareholders to the members (policyholders) of a takaful or Islamic insurance fund.
A qard hassan arrangement would be put in place where a takaful account produces deficits that may imperil the solvency and security of the takaful company. It is designed to redress deficits and reinstate the company’s viability. In some countries there are no specific limits to the amount of the qard hassan, but in others there are legislative limits, such as replenishment of funds (if required) up to the amount of the initial paid-up capital of the company.
Although the qard hassan is interest-free, its capital sum is subject to ultimate repayment by the collective contributing members to the takaful founders/shareholders. In the absence of specific legislative regulations, the terms of this repayment are open to agreement between the founders/shareholders and the contributing members.
EMPLOYEE BENEFITS & PENSIONS
Qualifying contribution is a contribution that accrues rights to a benefit (usually a social security benefit); contributions may include actual paid contributions and credited contributions (such as for periods of study).
EMPLOYEE BENEFITS & PENSIONS
The period in which the employee accrues rights to a benefit (usually a social security benefit); the period may include periods of service with an employer and periods of no actual service with an employer (such as whilst totally disabled).
LEGAL & DISPUTE RESOLUTION
Quantum is the monetary amount payable by way of indemnity.
FINANCIAL & ACCOUNTING TERMS
Rate is another term for premium rate.
INTERNATIONAL INSURANCE & REGULATION
Resident expatriate is an employee that has been temporarily relocated to work in another country (a host country).
INSURANCE DISTRIBUTION
Retail broker is another term for broker, retail.
ISLAMIC INSURANCE
Retakaful is Islamic reinsurance that allows takaful operators to share or transfer risk in a Sharia-compliant way.
Read the full definition of Retakaful >LIFE & HEALTH INSURANCE
Reversionary Bonus is a bonus added to with-profit (participating) life assurance policies such as whole life or endowment, which is expressed as a percentage of the sum assured and previously declared reversionary bonuses.
NATURAL CATASTROPHE & WEATHER
Also referred to as the Saffir-Simpson Hurricane Wind Scale, this scale was developed in the late 1960s for the purposes of rating hurricane intensity and forecasting resultant property damage.
The scale uses ratings from 1 to 5 based on hurricane wind speed, with 1 denoting the lowest wind speed on the scale and 5 the highest and most damaging (to human life and to property). The scale excludes other factors such as the size of the hurricane and precipitation types and levels.
NATURAL CATASTROPHE & WEATHER
Saffir-Simpson scale values are the values assigned to hurricane events under the Saffir-Simpson scale, which forecasts the likely property damage resulting from a hurricane.
Saffir-Simpson scale values are as follows:
1. (74 to 95 mph) - some damage to buildings but minimal and not affecting building structures. Most damage at this level is to trees, foliage and power lines.
2. (96 to 110 mph) - described as causing moderate damage, winds at this speed can cause damage to roofs, windows and doors, piers, coastal roads, small water craft and mobile homes, and can uproot small trees.
3. (111 to 129 mph) - extensive damage; framed buildings may sustain considerable damage and constructions close to the coast will most likely incur serious flooding if not outright destruction. Evacuation of coastal areas likely.
4. (130 to 155 mph) - devastating damage, with well constructed buildings damaged severely through loss of exterior walls and roof structure failure, signs, trees and foliage all blown down. Large-scale evacuation likely and of homes further inland than would be evacuated under value 3 winds. Affected area left uninhabitable for weeks.
5. (156 mph and higher) - catastrophic damage, including some total building structure failures, complete destruction of mobile homes, small buildings overturned and evacuation of all properties within five to 10 miles of the coastline. Affected area left uninhabitable for months.
EMPLOYEE BENEFITS & PENSIONS
Salary is an insurance term that refers to remuneration received by an employee that is paid weekly, monthly or annually, as opposed to hourly pay.
EMPLOYEE BENEFITS & PENSIONS
Salary continuance insurance is an insurance plan that provides a prescribed level of salary replacement on the occurrence of an insured event, such as disablement and sickness.
EMPLOYEE BENEFITS & PENSIONS
Salary sacrifice is an arrangement between the employer and the employee whereby a part of the employee’s salary is forfeited in return for an equivalent benefit; for example, an employer pension plan contribution.
INTERNATIONAL INSURANCE & REGULATION
The Schengen area is a defined territory within which the free movement of persons is guaranteed.
Those EU member states that have signed the Schengen Agreement of 1985 (which is not all EU member states) have abolished all internal borders in favour of a single, external, border. Within the Schengen area there are common rules and procedures with regard to visas for short stays, asylum requests and border controls, and there is also heightened co-operation and co-ordination between police services and judicial authorities across the signatory member states. Schengen co- operation was incorporated into the European Union (EU) legal framework by the Treaty of Amsterdam of 1997.
LIFE & HEALTH INSURANCE
Life assurance effected for the purpose of providing cash at relevant times to assist the assured with the payment of school fees.
A with-profits endowment policy can be used with the sum assured payable in stages, or against which loans can be taken out under the policy periodically, after the policy has run for a planned number of years. The loans are then repaid out of policy proceeds when they become available on death or maturity.
LIABILITY INSURANCE
The second party in insurance is typically the insured or policyholder covered by the policy.
ISLAMIC INSURANCE
Takaful is Islamic insurance based on mutual assistance, where participants contribute to a shared fund used to pay eligible claims.
Read the full definition of Takaful >ISLAMIC INSURANCE
Family takaful refers to what is known in conventional insurance as ‘life’ business and includes long-term savings and protection plans, including provision for retirement, education costs and mortgages.
Takaful operations may only invest funds in sharia-compliant operations.
ISLAMIC INSURANCE
General takaful refers to what is known in conventional insurance as ‘non- life’, or ‘property and casualty’ business.
General takaful encompasses motor and personal accident business.
EMPLOYEE BENEFITS & PENSIONS
Tax credit is a reduction in the amount of tax payable.
EMPLOYEE BENEFITS & PENSIONS
Tax deduction is a reduction in the amount of taxable income that is subject to income tax or corporate income tax.
LIFE & HEALTH INSURANCE
Temporary Annuity is an annuity under which the payments to an annuitant will cease at the end of a given period or at death, whichever shall occur first.
LIFE & HEALTH INSURANCE
A term used to describe a ten-year endowment or whole life policy under which premiums must be paid for a minimum of 10 years in order to rank as a qualifying policy for UK tax relief.
This is of historic interest only, as no such tax relief has been given for new policies effected in the UK since 1984.
LIFE & HEALTH INSURANCE
A life policy that pays the sum insured only if death occurs within the term of the policy.
If the life insured survives the term, cover ends and no survival benefit is paid. This type of policy is also called temporary assurance (or insurance).
LIFE & HEALTH INSURANCE
An additional bonus added to existing life assurance benefits when a with-profits policy becomes a claim by death or survival of the policy term.
A terminal bonus may be a percentage of the sum assured, of reversionary bonuses or of the sum assured plus reversionary bonuses. A terminal bonus rate may be indicated before a claim arises but it is not guaranteed as it normally reflects equity gains on the insurer’s investment portfolio, which are potentially volatile.
EMPLOYEE BENEFITS & PENSIONS
A pensions arrangement not common in the UK, except for discretionary pension increases, whereby a payment to meet the present value of a benefit is made only when the benefit is due to commence.
EMPLOYEE BENEFITS & PENSIONS
Termination indemnities is the legal obligation of the employer to make payment to an employee upon termination of the employment contract.
LIABILITY INSURANCE
In insurance terms, the third party refers to one who is claiming against the insured or policyholder (who is referred to as the second party) for injury or damage.
Third party may also refer to a person or organisation who is considered liable for injury or damage caused.
UNDERWRITING & DISCLOSURE
Uberimma fides is another term for utmost good faith.
CLAIMS & POLICY MECHANICS
Underinsurance is a situation where the insured value is lower than the actual value at risk, which can reduce claim payments.
Read the full definition of Underinsurance >PROPERTY INSURANCE
Uninsured perils is another term for unnamed perils.
INVESTMENT & SAVINGS PRODUCTS
A pooled investment plan in which individual units are purchased with a lump sum, by regular investment or both.
The number of units purchased is dependent upon the (purchase) unit price at the time of purchase; the withdrawal value of the investment is equal to the number of units purchased multiplied by the (sell) unit price at the time of withdrawal.
INVESTMENT & SAVINGS PRODUCTS
Called a mutual fund in the US.
A form of investment trust where investors (unit holders) obtain a fractional interest in a fund by purchasing units from the managers of the trust on the understanding that they can resell their units to the managers at a price closely reflecting the stock market value of the trust’s investments.
INVESTMENT & SAVINGS PRODUCTS
Investment funds akin to unit trusts which are managed internally by life insurers and which represent the investments in such funds effected under unit-linked life assurance policies.
LIFE & HEALTH INSURANCE
Called variable life in the US.
An open-ended life insurance policy under which some of the premium is used to purchase life cover, while the balance (the larger proportion) is invested in fund units. According to the options available from the insurer, the policyholder chooses which funds to invest in. The units may either be invested in one or more externally managed unit trusts, the stock market or elsewhere, or in an internally managed unitised fund or funds. This type of policy is a riskier alternative to a conventional with-profits policy because the value of the investments is mirrored in the price of the units so that the policy value moves up or down reflecting changes in the performance of the chosen fund.
At maturity the policyholder receives the net value of all the units purchased by his or her premiums or the units themselves. In most schemes there is the facility to switch from one fund to another to take advantage of changes in investment conditions. The policyholder takes certain investment risks under a unit-linked policy, whereas under a conventional with-profits policy reversionary bonuses once declared are guaranteed, notwithstanding future investment performance. Minimum guaranteed life covers normally maintained throughout the policy’s life.
LIFE & HEALTH INSURANCE
A US concept which has become international, it is a policy which operates as a flexible whole life assurance and allows the policyholder to change both premiums and life cover, within constraints.
It is even possible to take a premium holiday if the policy reserve is large enough. This flexibility is achieved by building a number of options into the plan at the outset. The premium is split between expenses (including commission) and death and other risk premiums, with the balance being used to build up a policy reserve.
The fund in which such reserves are invested declares an annual rate of interest which is then credited to each underlying policy reserve. The eventual return from the contract equals the premiums paid with investment additions, less expenses for administration, death and other risk premium charges and commissions.
PROPERTY INSURANCE
Those perils that are not declared at all in an insurance policy, as being either covered or not covered by that policy.
Unnamed perils can cause some difficulties when determining whether a loss is covered: in such cases, insurers apply the principle of proximate cause. If a loss is caused by an unnamed peril but the proximate cause of that loss is found to be a named peril, then it is covered.
PROPERTY INSURANCE
Unspecified perils is another term for unnamed perils.
UNDERWRITING & DISCLOSURE
Utmost good faith is an insurance principle requiring both parties to disclose material information honestly before and during the contract.
Read the full definition of Utmost good faith >CLAIMS & POLICY MECHANICS
Valuation is an insurance term that refers to annual assessment of the insurer’s assets and liabilities in the manner required by law or by the supervisory authorities.
CLAIMS & POLICY MECHANICS
A valued policy is one under which the value at risk is agreed between the insurer and the insured.
It is an indemnity policy in the sense that the insured is restored to the financial position that he or she enjoyed before the loss but the indemnity is based on a pre-agreed amount and does not take account of any variations in market price (positive or negative) or factors affecting value such as wear and tear or deterioration.
LIFE & HEALTH INSURANCE
An annuity contract under which the payments to the annuitant will vary with the results of an investment portfolio or will be linked to a cost of living index.
May contain a guarantee of the minimum annuity income payable regardless of investment performance, subject to higher charges.
LIFE & HEALTH INSURANCE
The US version of unit-linked life assurance in the UK.
The invested portion of premiums is allocated to specific investment funds at the choice of the policyholder.
LIFE & HEALTH INSURANCE
Combines the premium flexibility features of a universal life policy with the investment features of a variable life policy.
It is a universal life policy under which, as under unit-linked or variable life assurance, the invested portion of premiums is allocated to specific investment funds (egg equities, property, cash etc) at the choice of the policyholder.
EMPLOYEE BENEFITS & PENSIONS
A term used to indicate the period of time before which ownership of the rights under a retirement or other benefit plan will transfer to the employee.
EMPLOYEE BENEFITS & PENSIONS
The (reversionary) bonus declared in respect of and allotted to with-profits life policies.
Once declared it is said to “vest” and is added to the life assurance benefit and the existing bonuses. All vested bonuses become payable under the same conditions as the face sum assured and once added cannot be taken away.
LIFE & HEALTH INSURANCE
Waiting period is a period during which benefits are not payable (for example, the first three days of illness) or do not accrue (for example, the first six months of employment).
LIFE & HEALTH INSURANCE
Waiver of premium is a policy benefit where the insurer continues premiums or contributions after an insured disability or qualifying event.
ISLAMIC INSURANCE
The wakala system is a type of agency agreement whereby a takaful or Islamic insurance operator acts as a manager on behalf of members (policyholders) in return for a fee, usually a percentage of gross written premiums.
The wakala system is most commonly deployed for underwriting. In the wakala system, unlike muduraba, there is no sharing of fortunes between the takaful operator and the members. Where an underwriting account is managed on a wakala basis, the members wholly own and may share, in proportion to the contributions paid by each member, any net underwriting surpluses (after the deduction, inter alia, of the wakala fee).
The takaful operator’s sole revenue from the part of the operation in which wakala is applied is the wakala fee itself. In the wakala system the takaful operator arranges retakaful and manages underwriting policy as it sees fit. Legal liability for errors, omissions or negligence by the takaful operator varies between countries and may not be specified in legislation, in which case it would be left to the judgment of the courts, usually according to the rules and principles of the relevant legal system and the facts of the case.
ISLAMIC INSURANCE
The waqf takaful or Islamic insurance system is not for profit and relies on membership contributions which are a 100% donation, sometimes known as tabarru.
Essentially, waqf operates as a public foundation. Whereas in the mudaraba and wakala models investment and underwriting funds are owned by the respective contributors, in the waqf system they are not owned by anyone in particular. Surplus from operations within the mudaraba and wakala models can be distributed between the contributors but such distribution is not possible in the waqf model, with the result that such surpluses remain unallocated.
EMPLOYEE BENEFITS & PENSIONS
White collar employee is a term that describes an employee who performs non-manual labour.
LIFE & HEALTH INSURANCE
A policy which will remain in force (subject to continuing premium payment) until the life assured dies, when the sum assured becomes payable.
The premium paying period may be limited to, for example, age 90, after which cover continues without further charge. May participate in bonuses (participating or with-profits policies).
INSURANCE DISTRIBUTION
Wholesale broker is another term for broker, wholesale.
NATURAL CATASTROPHE & WEATHER
Catch-all term used to refer to the variety of fires that occur in the wild due to natural phenomena in climate or weather, such as spontaneous combustion or lightning storms.
Such fires include bushfire, forest fire and grass fire. These different, more precise, names depend simply on what is on fire and where the fire occurs; wildfires can occur anywhere in the world.
LIFE & HEALTH INSURANCE
Life assurance policies that guarantee a fixed sum on death or survival (according to whether whole life or endowment) without any addition to represent a share in the profits of the insurer are known as without- profits policies (non-participating policies in US terminology).
The real value of the sum assured is eroded by inflation, but at the same time the real cost reduces as the premium is fixed in money terms at the outset. At the outset each £ spent buys more cover than under an equivalent with- profits policy.
LIFE & HEALTH INSURANCE
Whole life policies and endowment policies which attract bonuses representing a share in the profits of the life insurer are known as with- profits policies (participating policies in US terminology).
Bonuses are declared every year and, once declared, the bonus becomes a guaranteed addition to the sum assured with which it ultimately becomes payable. Unlike without-profits policies they provide some protection against inflation but each £ spent buys less initial cover by way of sum assured.
LIABILITY INSURANCE
Workers’ compensation is insurance or a statutory scheme that provides medical, income and compensation benefits for work-related injury, illness or disease.
Read the full definition of Workers’ compensation >There are currently no glossary terms under X.
There are currently no glossary terms under Y.
FINANCIAL & ACCOUNTING TERMS
Zillmerisation is the process whereby an adjustment is made in the actuarial valuation of long-term business to take credit for the recovery from future premiums of the costs of acquiring new business.
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