## Glossary of Insurance Terms

• Accident insurance: Insurance product which covers expenses or pays the policyholder directly in the event of an accident resulting in injury.

• Acquisition costs: Expenses incurred by an insurance company in acquiring new policyholders or renewing existing policies.

• Actuary: Experts who assess risks by analyzing statistics and data, often working with insurance companies to help set rates for insurance products.

• Adjuster: A person who investigates and settles insurance claims.

• Agent: Someone who sells insurance policies for an insurance company or carrier. Their agency may be exclusive or non-exclusive.

• Aggregate Limit: The maximum amount an insurer will pay for all covered losses during a policy period. Once reached, the policy will no longer respond to claims for that period.

• Bancassurance: A partnership between banks and insurance companies, where banks sell insurance products to their customers.

• Base rate: The standard premium set by an insurer for a specific coverage type, representing the average cost of providing coverage to a group with similar risk profiles.

• Beneficiary: Usually used in life insurance, a person designated as the recipient of payment in the event of the policyholder’s death.

• Book of Business: The complete portfolio of insurance policies that an insurance agent, broker, or company has underwritten and currently manages.

• Brokerage fee: Compensation charged by an insurance broker for their services, usually a percentage of the premium paid by the client.

• Builder’s Risk Insurance: Covers buildings while they are being constructed, including materials, fixtures, and equipment being used in the construction.

• Business Interruption Insurance: Covers the loss of income that a business suffers after a disaster, including lost revenues and fixed costs like rent and utilities.

• Cash value: The savings component of certain life insurance policies, which grows over time based on premiums paid and investments made by the insurance company.

• Claim: Request by a policyholder or third party from an insurance company for compensation of losses covered by insurance.

• Claim adjuster: Also known as an insurance adjuster or claims examiner, responsible for investigating insurance claims and determining appropriate settlements.

• Claim item: A specific component or element within an insurance claim. It represents an individual loss or damage that is part of the overall claim. For example, in a home insurance claim after a storm, claim items might include roof damage, water damage to walls, and damaged personal belongings. Each claim item typically has its own description, valuation, and may be subject to different policy provisions or deductibles.

• Claimant: The person who files the claim, usually the policyholder.

• Combined ratio: A performance measure used to evaluate the profitability and financial health of an insurance company, calculated as ((Incurred Losses + Expenses) / Earned Premium) * 100.

• Commercial Auto Insurance: Covers vehicles used for business purposes, including liability coverage, physical damage coverage, and optional add-ons.

• Commercial General Liability (CGL): A standard insurance policy for businesses, protecting against liability claims for bodily injury and property damage arising from products, services, or operations.

• Commission: Compensation or payment that an insurance agent or broker receives for selling an insurance policy or generating business for an insurance company.

• Compulsory insurance: Insurance that is required by law. In many European countries, this includes motor third-party liability insurance and professional indemnity for certain professions.

• Composite insurer: An insurance company that offers multiple lines of coverage, such as life, health, property, and auto insurance.

• Coverage: The scope and extent of protection provided by an insurance policy for a specific risk or event.

• Customer Service Representative: Commonly abbreviated CSR, plays a crucial role in providing essential support to policyholders and potential customers.

• Cyber Insurance: Covers businesses for risks related to information technology infrastructure and activities. This can include data breaches, cyberattacks, and other IT-related risks. Coverage may include costs related to data recovery, business interruption, legal fees, and public relations expenses.

• Cyber Liability Insurance: Covers businesses for data breaches involving sensitive customer information, including legal fees, customer notifications, and credit monitoring.

• Deductible: The amount that you must pay out of your own pocket before the insurance company will begin paying towards any covered expenses.

• Difference in Conditions (DIC): A type of policy that provides expanded coverage for some perils not covered by standard insurance policies. It’s often used to fill gaps in coverage, particularly for catastrophic perils like earthquake or flood. DIC policies are typically used by businesses to broaden their property coverage and can be either a stand-alone policy or an endorsement to an existing policy.

• Direct insurance: Insurance distribution model where products are sold directly to customers without involving intermediaries such as insurance agents or brokers.

• Directors and Officers (D&O) Liability Insurance: Covers directors and officers of a company against claims made for decisions and actions taken within the scope of their duties.

• Double insurance: Also known as “dual insurance,” occurs when a single risk or event is covered by two or more insurance policies simultaneously.

• Dunning: The process of contacting policyholders to remind them of overdue premium payments.

• EEA (European Economic Area): An area allowing for the free movement of persons, goods, services, and capital within the European single market, including the EU countries and also Iceland, Liechtenstein and Norway.

• EIOPA (European Insurance and Occupational Pensions Authority): The European Union financial regulatory institution that oversees the insurance and occupational pensions sectors.

• Embedded insurance: The bundling and sale of insurance coverage or protection while a consumer is purchasing a product or service.

• Endorsement: A modification or amendment made to an existing insurance policy, altering terms, conditions, or coverage.

• Environmental Liability Insurance: Covers the cost of restoring damage caused by environmental accidents, increasingly important due to EU environmental protection regulations.

• Excess Insurance: Coverage that exceeds the limits of a basic or primary policy, typically following the terms of the underlying policy.

• Exclusion: A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.

• FNOL: First Notice of Loss, the initial report made to an insurance provider following loss, theft, or damage of an insured asset.

• Flood insurance: A specialized policy providing financial protection against damages caused by flooding, typically not covered by standard homeowners’ insurance.

• GDPR (General Data Protection Regulation): EU regulation on data protection and privacy that affects how insurers handle customer data.

• Green Card: An international certificate of insurance that guarantees that the visiting motorist has the necessary minimum motor insurance cover for driving in the country visited.

• Indemnity: The principle that insurance aims to restore the policyholder to the same financial position they were in before the covered loss occurred.

• Inland Marine Insurance: Covers property in transit over land and certain types of moveable property, despite its name not being limited to marine risks.

• Insurance: A mechanism for protecting people against losses, damage, injuries, and costs associated with unforeseen events.

• Insurance Distribution Directive (IDD): EU directive that regulates how insurance products are designed and sold by insurance companies and intermediaries.

• Insurance premium tax: A type of tax imposed by certain jurisdictions on insurance premiums paid by policyholders.

• Liability Insurance: Protects the insured against claims resulting from injuries and damage to other people or property, covering legal costs and payouts.

• Lloyd’s of London: An insurance and reinsurance market located in London, where members join together as syndicates to insure risks.

• Loss Control: Risk management practices to reduce the possibility of a loss or the severity of losses, including safety programs and security measures.

• Minimum Capital Requirement (MCR): The minimum level of security below which the amount of insurance company’s financial resources should not fall, as defined in Solvency II.

• Mutual Insurance: An insurance company owned entirely by its policyholders. This model is common in parts of Europe.

• Non-life Insurance: Also known as general insurance, it includes all insurance that is not determined to be life insurance. Common in European insurance categorization.

• Passporting: The exercise by a financial services firm of its right to carry on business in an EEA state other than its home state on the basis of authorization in its home state.

• Peril: The cause of a possible loss in an insurance policy, such as fire, theft, or windstorm.

• Professional Liability Insurance (Errors and Omissions): Protects professionals against negligence claims made by their clients for financial losses due to errors, omissions, or failure to perform.

• Property Insurance: Covers damage to or loss of the policyholder’s property, including buildings, equipment, inventory, and personal property.

• Reinsurance: Insurance that insurance companies buy to protect themselves, allowing them to transfer some financial risk to other parties.

• Reserves: Funds set aside by insurance companies to pay future claims on policies underwritten by the insurer. These represent the insurer’s estimate of future liabilities and are a key component of an insurance company’s financial stability. Types of reserves include:

  • Unearned Premium Reserve: For premiums collected for future coverage periods.
  • Loss Reserves: Estimates of amounts needed to settle known claims.
  • Incurred But Not Reported (IBNR) Reserves: For claims that have occurred but not yet been reported to the insurer. Accurate reserving is crucial for an insurer’s solvency and is closely monitored by regulators and rating agencies.

• Solvency II: EU legislative programme implemented in 2016 to harmonise EU insurance regulation, primarily concerning the amount of capital that EU insurance companies must hold to reduce the risk of insolvency.

• Subclaim: A subordinate or secondary claim that is part of a larger, primary insurance claim. Subclaims are often used in complex insurance cases where a single incident results in multiple, distinct areas of loss or damage. For example, in a business interruption claim, subclaims might include loss of income, employee wages, and ongoing operating expenses. Subclaims allow for more detailed tracking and processing of different aspects of a complex claim.

• Subrogation: An insurance company’s right to legally pursue a third party that caused an insurance loss to the insured.

• UCITS (Undertakings for Collective Investment in Transferable Securities): A regulatory framework of the European Union that creates a harmonized regime throughout Europe for the management and sale of mutual funds.

• Umbrella Insurance: Provides additional liability coverage above the limits of other policies, potentially covering excluded claims.

• Underwriting: The process of evaluating a risk for insurance and determining its acceptability, assessing factors like claim likelihood and potential cost.

• Workers’ Compensation: Insurance providing wage replacement and medical benefits to employees injured in the course of employment, mandatory in most jurisdictions.