|
PACKAGE POLICY |
A single insurance
policy that combines several coverages
previously sold separately. Examples include
homeowners insurance and commercial multiple
peril insurance.
|
|
PAY-AT-THE-PUMP |
A system proposed in
the 1990s in which auto insurance premiums
would be paid to state governments through a
per-gallon surcharge on gasoline.
|
|
PENSION BENEFIT
GUARANTY CORPORATION |
An independent federal
government agency that administers the
Pension Plan Termination Insurance program
to ensure that vested benefits of employees
whose pension plans are being terminated are
paid when they come due. Only defined
benefit plans are covered. Benefits are paid
up to certain limits.
|
|
PENSIONS |
Programs to provide
employees with retirement income after they
meet minimum age and service requirements.
Life insurers hold some of these funds.
Since the 1970s responsibility for funding
retirement has increasingly shifted from
employers (defined benefit plans that
promise workers a specific retirement
income) to employees (defined contribution
plans financed by employees that may or may
not be matched by employer contributions).
(See
Defined benefit plan;
Defined contribution plan)
|
|
PERIL |
A specific risk or
cause of loss covered by an insurance
policy, such as a fire, windstorm, flood, or
theft. A named-peril policy covers the
policyholder only for the risks named in the
policy in contrast to an all-risk policy,
which covers all causes of loss except those
specifically excluded.
|
|
PERSONAL ARTICLES
FLOATER |
A policy or an
addition to a policy used to cover personal
valuables, like jewelry or furs.
|
|
PERSONAL INJURY
PROTECTION COVERAGE / PIP |
Portion of an auto
insurance policy that covers the treatment
of injuries to the driver and passengers of
the policyholder’s car.
|
|
PERSONAL LINES |
Property/casualty
insurance products that are designed for and
bought by individuals, including homeowners
and automobile policies. (See
Commercial lines)
|
|
POINT-OF-SERVICE
PLAN |
Health insurance
policy that allows the employee to choose
between in-network and out-of-network care
each time medical treatment is needed.
|
|
POLICY |
A written contract for
insurance between an insurance company and
policyholder stating details of coverage.
|
|
POLICYHOLDERS'
SURPLUS |
The amount of money
remaining after an insurer’s liabilities are
subtracted from its assets. It acts as a
financial cushion above and beyond reserves,
protecting policyholders against an
unexpected or catastrophic situation.
|
|
POLITICAL RISK
INSURANCE |
Coverage for
businesses operating abroad against loss due
to political upheaval such as war,
revolution, or confiscation of property.
|
|
POLLUTION INSURANCE |
Policies that cover
property loss and liability arising from
pollution-related damages, for sites that
have been inspected and found
uncontaminated. It is usually written on a
claims-made basis so policies pay only
claims presented during the term of the
policy or within a specified time frame
after the policy expires. (See
Claims-made policy)
|
|
POOL |
See
Insurance pool
|
|
PREFERRED PROVIDER
ORGANIZATION |
Network of medical
providers which charge on a fee-for-service
basis, but are paid on a negotiated,
discounted fee schedule.
|
|
PREMISES |
The particular
location of the property or a portion of it
as designated in an insurance policy.
|
|
PREMIUM |
The price of an
insurance policy, typically charged annually
or semiannually. (See
Direct premiums;
Earned premium;
Unearned premium)
|
|
PREMIUM TAX |
A state tax on
premiums paid by its residents and
businesses and collected by insurers.
|
|
PREMIUMS IN FORCE |
The sum of the face
amounts, plus dividend additions, of life
insurance policies outstanding at a given
time.
|
|
PREMIUMS WRITTEN |
The total premiums on
all policies written by an insurer during a
specified period of time, regardless of what
portions have been earned. Net premiums
written are premiums written after
reinsurance transactions.
|
|
PRIMARY COMPANY |
In a reinsurance
transaction, the insurance company that is
reinsured.
|
|
PRIMARY MARKET |
Market for new issue
securities where the proceeds go directly to
the issuer.
|
|
PRIME RATE |
Interest rate that
banks charge to their most creditworthy
customers. Banks set this rate according to
their cost of funds and market forces.
|
|
PRIOR APPROVAL
STATES |
States where insurance
companies must file proposed rate changes
with state regulators, and gain approval
before they can go into effect.
|
|
PRIVATE MORTGAGE
INSURANCE |
See
Mortgage guarantee insurance
|
|
PRIVATE PLACEMENT |
Securities that are
not registered with the Securities and
Exchange Commission and are sold directly to
investors.
|
|
PRODUCT LIABILITY |
A section of tort law
that determines who may sue and who may be
sued for damages when a defective product
injures someone. No uniform federal laws
guide manufacturer’s liability, but under
strict liability, the injured party can hold
the manufacturer responsible for damages
without the need to prove negligence or
fault.
|
|
PRODUCT LIABILITY
INSURANCE |
Protects
manufacturers’ and distributors’ exposure to
lawsuits by people who have sustained bodily
injury or property damage through the use of
the product.
|
|
PROFESSIONAL
LIABILITY INSURANCE |
Covers professionals
for negligence and errors or omissions that
injure their clients.
|
|
PROOF OF LOSS |
Documents showing the
insurance company that a loss occurred.
|
|
PROPERTY/CASUALTY
INSURANCE |
Covers damage to or
loss of policyholders’ property and legal
liability for damages caused to other people
or their property. Property/casualty
insurance, which includes auto, homeowners
and commercial insurance, is one segment of
the insurance industry. The other sector is
life/health. Outside the United States,
property/casualty insurance is referred to
as nonlife or general insurance.
|
|
PROPERTY/CASUALTY
INSURANCE CYCLE |
Industry business
cycle with recurrent periods of hard and
soft market conditions. In the 1950s and
1960s, cycles were regular with three year
periods each of hard and soft market
conditions in almost all lines of
property/casualty insurance. Since then they
have been less regular and less frequent.
|
|
PROPOSITION 103 |
A November 1988
California ballot initiative that called for
a statewide auto insurance rate rollback and
for rates to be based more on driving
records and less on geographical location.
The initiative changed many aspects of the
state’s insurance system and was the subject
of lawsuits for more than a decade.
|
|
PURCHASING GROUP |
An entity that offers
insurance to groups of similar businesses
with similar exposures to risk.
|
|
PURE LIFE ANNUITY |
|
A form of annuity that
ends payments when the annuitant dies.
Payments may be fixed or variable |
|
QUALIFIED ANNUITY |
|
A form of annuity
purchased with pretax dollars as part of a
retirement plan that benefits from special
tax treatment, such as a 401(k) plan. |
|
RATE |
The cost of a unit of
insurance, usually per $1,000. Rates are
based on historical loss experience for
similar risks and may be regulated by state
insurance offices.
|
|
RATE REGULATION |
The process by which
states monitor insurance companies’ rate
changes, done either through prior approval
or open competition models. (See
Open competition states;
Prior approval states)
|
|
RATING AGENCIES |
Six major credit
agencies determine insurers’ financial
strength and viability to meet claims
obligations. They are A.M. Best Co.; Duff &
Phelps Inc.; Fitch, Inc.; Moody’s Investors
Services; Standard & Poor’s Corp.; and Weiss
Ratings, Inc. Factors considered include
company earnings, capital adequacy,
operating leverage, liquidity, investment
performance, reinsurance programs, and
management ability, integrity and
experience. A high financial rating is not
the same as a high consumer satisfaction
rating.
|
|
RATING BUREAU
|
The insurance business
is based on the spread of risk. The more
widely risk is spread, the more accurately
loss can be estimated. An insurance company
can more accurately estimate the probability
of loss on 100,000 homes than on ten. Years
ago, insurers were required to use
standardized forms and rates developed by
rating agencies. Today, large insurers use
their own statistical loss data to develop
rates. But small insurers, or insurers
focusing on special lines of business, with
insufficiently broad loss data to make them
actuarially reliable depend on pooled
industry data collected by such
organizations as the Insurance Services
Office (ISO) which provides information to
help develop rates such as estimates of
future losses and loss adjustment expenses
like legal defense costs.
|
|
REAL ESTATE
INVESTMENTS |
Investments generally
owned by life insurers that include
commercial mortgage loans and real property.
|
|
RECEIVABLES |
Amounts owed to a
business for goods or services provided.
|
|
REDLINING |
Literally means to
draw a red line on a map around areas to
receive special treatment. Refusal to issue
insurance based solely on where applicants
live is illegal in all states. Denial of
insurance must be risk-based.
|
|
REINSURANCE |
Insurance bought by
insurers. A reinsurer assumes part of the
risk and part of the premium originally
taken by the insurer, known as the primary
company. Reinsurance effectively increases
an insurer's capital and therefore its
capacity to sell more coverage. The business
is global and some of the largest reinsurers
are based abroad. Reinsurers have their own
reinsurers, called retrocessionaires.
Reinsurers don’t pay policyholder claims.
Instead, they reimburse insurers for claims
paid. (See
Treaty reinsurance;
Facultative reinsurance)
|
|
RENTERS INSURANCE |
A form of insurance
that covers a policyholder’s belongings
against perils such as fire, theft,
windstorm, hail, explosion, vandalism,
riots, and others. It also provides personal
liability coverage for damage the
policyholder or dependents cause to third
parties. It also provides additional living
expenses, known as loss-of-use coverage, if
a policyholder must move while his or her
dwelling is repaired. It also can include
coverage for property improvements.
Possessions can be covered for their
replacement cost or the actual cash value
that includes depreciation.
|
|
REPLACEMENT COST |
Insurance that pays
the dollar amount needed to replace damaged
personal property or dwelling property
without deducting for depreciation but
limited by the maximum dollar amount shown
on the declarations page of the policy.
|
|
REPURCHASE
AGREEMENT /'REPO' |
Agreement between a
buyer and seller where the seller agrees to
repurchase the securities at an agreed upon
time and price. Repurchase agreements
involving U.S. government securities are
utilized by the Federal Reserve to control
the money supply.
|
|
RESERVES |
A company’s best
estimate of what it will pay for claims.
|
|
RESIDUAL MARKET |
Facilities, such as
assigned risk plans and FAIR Plans, that
exist to provide coverage for those who
cannot get it in the regular market.
Insurers doing business in a given state
generally must participate in these pools.
For this reason the residual market is also
known as the shared market.
|
|
RETENTION |
The amount of risk
retained by an insurance company that is not
reinsured.
|
|
RETROCESSION |
The reinsurance bought
by reinsurers to protect their financial
stability.
|
|
RETROSPECTIVE
RATING |
A method of permitting
the final premium for a risk to be adjusted,
subject to an agreed-upon maximum and
minimum limit based on actual loss
experience. It is available to large
commercial insurance buyers.
|
|
RETURN ON EQUITY |
Net income divided by
total equity. Measures profitability by
showing how efficiently invested capital is
being used.
|
|
RIDER |
An attachment to an
insurance policy that alters the policy’s
coverage or terms.
|
|
RISK |
The chance of loss or
the person or entity that is insured.
|
|
RISK MANAGEMENT |
Management of the
varied risks to which a business firm or
association might be subject. It includes
analyzing all exposures to gauge the
likelihood of loss and choosing options to
better manage or minimize loss. These
options typically include reducing and
eliminating the risk with safety measures,
buying insurance, and self-insurance.
|
|
RISK RETENTION
GROUPS |
Insurance companies
that band together as self-insurers and form
an organization that is chartered and
licensed as an insurer in at least one state
to handle liability insurance.
|
|
RISK-BASED CAPITAL |
|
The need for insurance
companies to be capitalized according to the
inherent riskiness of the type of insurance
they sell. Higher-risk types of insurance,
liability as opposed to property business,
generally necessitate higher levels of
capital. |
|
SALVAGE |
Damaged property an
insurer takes over to reduce its loss after
paying a claim. Insurers receive salvage
rights over property on which they have paid
claims, such as badly-damaged cars. Insurers
that paid claims on cargoes lost at sea now
have the right to recover sunken treasures.
Salvage charges are the costs associated
with recovering that property.
|
|
SCHEDULE |
A list of individual
items or groups of items that are covered
under one policy or a listing of specific
benefits, charges, credits, assets or other
defined items.
|
|
SECONDARY MARKET |
Market for previously
issued and outstanding securities.
|
|
SECURITIES AND
EXCHANGE COMMISSION / SEC |
The organization that
oversees publicly-held insurance companies.
Those companies make periodic financial
disclosures to the SEC, including an annual
financial statement (or 10K), and a
quarterly financial statement (or 10-Q).
Companies must also disclose any material
events and other information about their
stock.
|
|
SECURITIES
OUTSTANDING |
Stock held by
shareholders.
|
|
SECURITIZATION OF
INSURANCE RISK |
Using the capital
markets to expand and diversify the
assumption of insurance risk. The issuance
of bonds or notes to third-party investors
directly or indirectly by an insurance or
reinsurance company or a pooling entity as a
means of raising money to cover risks. (See
Catastrophe bonds)
|
|
SELF-INSURANCE |
The concept of
assuming a financial risk oneself, instead
of paying an insurance company to take it
on. Every policyholder is a self-insurer in
terms of paying a deductible and
co-payments. Large firms often self-insure
frequent, small losses such as damage to
their fleet of vehicles or minor workplace
injuries. However, to protect injured
employees state laws set out requirements
for the assumption of workers compensation
programs. Self-insurance also refers to
employers who assume all or part of the
responsibility for paying the health
insurance claims of their employees. Firms
that self insure for health claims are
exempt from state insurance laws mandating
the illnesses that group health insurers
must cover.
|
|
SEVERITY |
Size of a loss. One of
the criteria used in calculating premiums
rates.
|
|
SEWER BACK-UP
COVERAGE |
An optional part of
homeowners insurance that covers sewers.
|
|
SHARED MARKET |
See
Residual market
|
|
SINGLE PREMIUM
ANNUITY |
An annuity that is
paid in full upon purchase.
|
|
SOFT MARKET |
An environment where
insurance is plentiful and sold at a lower
cost, also known as a buyers’ market. (See
Property/casualty insurance cycle)
|
|
SOLVENCY |
Insurance companies’
ability to pay the claims of policyholders.
Regulations to promote solvency include
minimum capital and surplus requirements,
statutory accounting conventions, limits to
insurance company investment and corporate
activities, financial ratio tests, and
financial data disclosure.
|
|
SPREAD OF RISK |
The selling of
insurance in multiple areas to multiple
policyholders to minimize the danger that
all policyholders will have losses at the
same time. Companies are more likely to
insure perils that offer a good spread of
risk. Flood insurance is an example of a
poor spread of risk because the people most
likely to buy it are the people close to
rivers and other bodies of water that flood.
(See
Adverse selection)
|
|
STACKING |
Practice that
increases the money available to pay auto
liability claims. In states where this
practice is permitted by law, courts may
allow policyholders who have several cars
insured under a single policy, or multiple
vehicles insured under different policies,
to add up the limit of liability available
for each vehicle.
|
|
STATUTORY
ACCOUNTING PRINCIPLES / SAP |
More conservative
standards than under GAAP accounting rules,
they are imposed by state laws that
emphasize the present solvency of insurance
companies. SAP helps ensure that the company
will have sufficient funds readily available
to meet all anticipated insurance
obligations by recognizing liabilities
earlier or at a higher value than GAAP and
assets later or at a lower value. For
example, SAP requires that selling expenses
be recorded immediately rather than
amortized over the life of the policy. (See
GAAP accounting;
Admitted assets)
|
|
STOCK INSURANCE
COMPANY |
An insurance company
owned by its stockholders who share in
profits through earnings distributions and
increases in stock value.
|
|
STRUCTURED
SETTLEMENT |
Legal agreement to pay
a designated person, usually someone who has
been injured, a specified sum of money in
periodic payments, usually for his or her
lifetime, instead of in a single lump sum
payment. (See
Annuity)
|
|
SUBROGATION |
The legal process by
which an insurance company, after paying a
loss, seeks to recover the amount of the
loss from another party who is legally
liable for it.
|
|
SUPERFUND |
A federal law enacted
in 1980 to initiate cleanup of the nation’s
abandoned hazardous waste dump sites and to
respond to accidents that release hazardous
substances into the environment. The law is
officially called the Comprehensive
Environmental Response, Compensation, and
Liability Act.
|
|
SURETY BOND |
A contract
guaranteeing the performance of a specific
obligation. Simply put, it is a three-party
agreement under which one party, the surety
company, answers to a second party, the
owner, creditor or “obligee,” for a third
party’s debts, default or nonperformance.
Contractors are often required to purchase
surety bonds if they are working on public
projects. The surety company becomes
responsible for carrying out the work or
paying for the loss up to the bond “penalty”
if the contractor fails to perform.
|
|
SURPLUS |
The remainder after an
insurer’s liabilities are subtracted from
its assets. The financial cushion that
protects policyholders in case of
unexpectedly high claims. (See
Capital;
Risk-based capital)
|
|
SURPLUS LINES |
Property/casualty
insurance coverage that isn’t available from
insurers licensed in the state, called
admitted companies, and must be purchased
from a non-admitted carrier. Examples
include risks of an unusual nature that
require greater flexibility in policy terms
and conditions than exist in standard forms
or where the highest rates allowed by state
regulators are considered inadequate by
admitted companies. Laws governing surplus
lines vary by state.
|
|
SURRENDER CHARGE |
A charge for
withdrawals from an annuity contract before
a designated surrender charge period,
usually from five to seven years.
|
|
SWAPS |
|
The simultaneous
buying, selling or exchange of one security
for another among investors to change
maturities in a bond portfolio, for example,
or because investment goals have changed |
|
|
 Member Login
New member Our Network ADMK.in Site for AIADMK Great Hosting Review - Get an educated review of many web hosting companies. Consolidate My Bill - A fantastic credit card and debt consolidation resource site. Top Equity Loan - Resource rich site with top equity and other types of loans. Online Stock Central - Superb informational central on all aspects of stock market, trading, online websites and more. |