GLOSSARY

401(k) Plan

An employer-sponsored defined contribution retirement plan that provides certain tax benefits to both employees and employers.

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Abandonment

The giving up of property by the insured to the insurance company in order to collect the value of the property rather than restoring or

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Accident

An unplanned event, definite as to time and place, that results in injury or damage to a person or property.

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Accounting

Process to help quantify an organization’s assets, liabilities, stakeholder equities, and cash flows at a point in time.

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Accounting System

Organized set of accounting methods, procedures, and controls to collect, record, classify, and present accurate and timely financial data for use in management decision-making.

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Accumulation Phase

The period during which deposits are made and investment earnings accrue between purchase of a deferred annuity and the distribution of funds.

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Accumulation Value

During the accumulation period of a deferred annuity, the amount paid for the annuity, plus interest earned, less the amount of any withdrawals and fees.

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Acquisition

One organization takes over another organization and is established as the new owner with the ownership interests continuing unchanged.

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Active Retention

Planned acceptance of losses to be financed internally through the use of deductibles on insurance policies, loss sensitive insurance plans, and deliberate non-insurance. See Passive

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Actuary

An individual who calculates premium rates, reserves, dividends, and other important statistics.

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ACV

Abbreviation for Actual Cash ValueReplacement cost less an allowance for insurance depreciation, wear and tear, or obsolescence. https://www.youtube.com/watch?v=IOwFExvdr-c… More. Defined as replacement cost less an

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ADL

Person’s ability to perform such activities as bathing, dressing, toileting, maintaining continence, transferring, and eating.

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Admitted Assets

Assets whose value is included in the annual statement of an insurance company to insurance regulators; include cash and short-term deposits readily convertible into cash,

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Adverse Selection

Individuals with poor health who are more apt to apply for or continue insurance than those with average or better-than-average health.

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Agency

A relationship, express or implied, wherein one party (principal) delegates authority to another person (agent or proxy) to undertake certain activities for the principal. The

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Agency Captive

A captive owned by an insurance agency or agencies formed for the purpose of insuring the risks of agency clients or to participate with an

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Agency; Insurance

An office where insurance is sold. It may be directed towards property and liability insurance or life and health insurance, or both. Also, it might

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Agent; Insurance

A representative of one or more companies, who solicits, completes applications, collects initial premiums, issues binders and/or conditional receipts, delivers policies, and services insurance contracts.

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Aggregate Limit

The maximum amount of protection for all losses occurring under an insurance policy or funding arrangement during the specified term of the contract (usually one

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Aggregate Loss Contracts

Similar to LPT’s in how they treat existing losses and the development of premium. However, unlike an LPT, a retrospective aggregate loss contract addresses gaps

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ALAE

An expense directly assigned to or that arises from a particular claim; examples of Allocated Loss Adjustment ExpenseAn expense directly assigned to or that arises

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Aleatory Contract

A contract in which there is an unequal exchange between parties because the element of chance is involved in performance under the contract.

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Alien Insurer

An insurance company formed and domiciled in a country outside the United States and permitted to do business in the US contingent on financial guarantees.

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Allocated Loss Expense

An expense directly assigned to or that arises from a particular claim; examples of Allocated Loss Adjustment ExpenseAn expense directly assigned to or that arises

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Amortization

An accounting concept; expense (short-term) or capitalizing (long-term) of intermediate term costs (development costs); writing off the value of an intangible asset over its useful

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Amount Subject

Total value at risk at a single location regardless of protective measures limited only be adequate separation between structures.

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Annuitant

The individual on whose life the annuity is based and normally the person who receives the annuity payment.

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Annuitize

The beginning of a series of payments from an annuity. This term also refers to the settlement (payout) of life insurance policy proceeds under a

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Annuity

Payment of a benefit where an individual receives a regular stream of income from the insurer, for life or for a specified number of years.

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Any Occupation

The insured is unable to perform the material and substantial duties of his or her own occupation and is not at work in any occupation.

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API

Enables machines to interact with cloud software in the same way the user interface facilitates interaction between humans and computers.

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Application

The statement of information given when a person applies for insurance. The insurer underwriter uses this information as a basis in determining whether the applicant

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Appointment

Providers are selected or appointed to represent the organization for all insurance coverage or for a specific purpose; an insurance procurement provider selection method.

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ARR

In financial management, the measurement of the percentage return of average annual cash flows on initial investment.

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Asset

Anything of commercial value, including real or personal, tangible or intangible property.

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Assignment

The transfer of all or part of a policy owner’s legal rights under the policy contract to another person or entity.

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Auto

A land motor vehicle, trailer, or semi-trailer designed for use on public roads, but does not include “mobile equipment.”

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Avoidance

A risk control technique which totally eliminates an exposure to avoid the chance of a loss; avoidance eliminates both positive and negative outcomes.

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B Value

In computing workers compensation experience modifications, a specific value taken from a rating manual table used to limit the effect of a single severe accident

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Backdating

A procedure for making the effective date of a policy earlier than the application date. BackdatingA procedure for making the effective date of a policy

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Bail Out Provision

An annuity contract clause that enables the owner of the contract to withdraw the invested money without surrender penalties if the annual interest rate drops

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Bailee

Person or organization that has possession of the property of others, usually for storage, repair, or servicing. A dry cleaning operation is a common example

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Bailment

Situation in which property of one has been entrusted to another. A bailment can be for the benefit of either party or both. The degree

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Bailor

Person or organization that owns property that has been entrusted to another. The owner of a suit who has entrusted it to a dry cleaning

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Balance Sheet

An accounting concept, a measurement of the assets and equities (liabilities and owners’ equity) in an organization as of a specific point in time.

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Ballast Value

In computing workers compensation experience modifications, a specific value taken from a rating manual table used to limit the effect of a single severe accident

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Basic Premium

In retrospectively rated plans, usually a percentage of the standard premium, often determined by multiplying the standard premium by a basic premium factor. It provides

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Basic Premium Factor

In retrospectively rated plans, a factor based on the Table of Expense Ratios, the Table of Insurance Charges, and the individual loss limitation if selected.

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Benchmarking

The process of comparing an organization’s business processes and performance measures to another organization’s processes and performance measures to provide a “snapshot” of the organization’s

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Beneficiary

An individual who is eligible to receive or is receiving benefits under an insurance policy. (Also see Irrevocable BeneficiaryA beneficiary that cannot be changed without

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Benefit-cost Ratio

Discounted values of the cash inflows divided by the net investment. Used to compare the net present value (PV) of various projects, particularly when funds

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Blanket Insurance

A method for combining the value of property of different types or at different locations into a single limit of insurance on a property insurance

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Bond

Contract that guarantees the performance of a contract, as in surety bonding, or protects against the dishonesty of employees, and in fidelity bonding. Unlike many

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Bottom-up Pricing

Commonly known as loss rating; losses are trended to ultimate values for a pre-set number of years; units of exposure are trended for those same

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Burglary

The taking of property from within a premises by a person unlawfully entering or breaking out of a premises as evidenced by marks of forcible

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Business Decision

As related to the Business Judgment RuleSingle most powerful defense available to a director or officer and recognizes that not all decisions of the directors

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Business Ethics

Knowing what is right or wrong in the workplace and then doing what is right; fundamental ground rules of our work lives; the process of

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Business Judgment Rule

Single most powerful defense available to a director or officer and recognizes that not all decisions of the directors or officers will benefit the organization

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Buy-Sell Agreement

An arrangement for the orderly disposition or transfer of a business interest that spells out what events specifically trigger the disposition of the business interest

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Cancellable Policy

A policy, typically disability insurance or long-term care insurance, that can be cancelled at any time, or at a specified time, by the insurer.

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Captive Expenses

Include management and acquisition expenses, domicile expenses such as annual licensing fees, actuarial expense, letter of credit expense, and other expenses not related to losses.

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Captive Insurer

A closely held insurance company whose insurance business is supplied by and controlled by its owners and in which the insureds are the beneficiaries (adapted

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Captive Pool

Group of individually owned captives that combine to re-insure one another; risk sharing among captives. See PoolingA self-insurance strategy used by two or more organizations

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CAS

Professional society for actuaries in areas of insurance work other than life insurance. This society grants the designation of Associate and Fellow of the Casualty

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Case Management

A team that carefully reviews and monitors the entire treatment process when unusually high expenses are projected or incurred for a condition.

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Case Reserve

Amount the claims adjuster puts on an individual claim that has not yet been paid; there is no provision for development and IBNRRepresents the liability

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Cash Discounting

Used to prepare cost-benefit analyses to determine the present value (or today’s value) of a future cash flow and/or determine the future value (or tomorrow’s

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Cash Flow

Measure of cash flowing through an organization arising from operations, financing, and investing activities.

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Cash Flow Plan

Insurance plans or retention plans that allow the insured, rather than an insurance carrier, to derive benefits from holding unused funds, either in the form

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Cash Surrender Value

The amount of cash due an insured who surrenders a Cash ValueThe amount of cash due an insured who surrenders a Cash Value Life Insurance

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Cash Value

The amount of cash due an insured who surrenders a Cash ValueThe amount of cash due an insured who surrenders a Cash Value Life Insurance

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Causality

In statistics, the relationship between one variable and another variable where the second variable is a direct consequence of the first.

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CDHC

CDHCCDHC or Consumer-Driven Healthcare – Originated in the late 1990’s with the intention of increasing healthcare consumer awareness of the rising cost of healthcare by

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Ceding Commission

Commission paid by the re-insurer to the primary insurer for the placement of the reinsurance. It is analogous to the commission paid to the producer

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Ceding Company

Direct or primary insurer that contracts with a re-insurer to share all or a certain portion of the losses it has assumed under insurance contracts

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Central Limit Theorem

In statistics, the theorem states that with an appropriately large sample, commonly values >30, that sample’s average can be treated as if it were drawn

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Certified Insurance Counselor (CIC)

Certified Insurance Counselor (CIC)Certified Insurance Counselor (CIC) is an insurance professional designation. The CIC program was started by the National Alliance for Insurance Education & Research in Austin, Texas in

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Claim Reserve

Estimation of the liability for unpaid claims that have occurred as of a given date, including the IBNRRepresents the liability for unpaid claims not reflected

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Claims Management

Prompt resolution of an organization’s losses subject to insurance or an active retention program including claims by other entities to whom it may be legally

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Claims Run

Listing of reported claims providing such information as the date of occurrence, type of claim, amount paid and amount reserved for each as of the

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Closed-Panel HMO Model

The most restrictive HMOProvides a comprehensive benefits package including physician visits, laboratory services, hospitalization and surgery, and focuses on preventive care, early diagnosis and outpatient

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COBRA

A federal regulation that requires employers with 20 or more employees in a prior year to allow employees and their covered dependents who lose employer-sponsored

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Coinsurance; Health

A form of cost sharing between the insured and the insurer. The insured is responsible for a stated percentage amount of eligible expenses, after satisfying

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Collateral

Property, usually in the form of funds or personal property, pledged to secure a debt or a loan; risk management definition of collateral – property,

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Common Law

Body of law consisting of prior precedents or rulings by judges and juries as to the facts of a case. These rulings form codes of

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Common Stock

Share or shares of ownership in a corporation with rights to vote on management and corporate policy but not preferred over other classes of stock

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Communication

Process of exchanging information using a shared set of symbols and a means of transmission; can range from very informal to very formal and from

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Commutation Right

The right of a beneficiary to receive in a single lump-sum the remaining payments under an installment option selected for the settlement of the proceeds

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Comparative Negligence

A defense based on a statutory modification of contributory negligence in which both parties are negligent and damages are apportioned between them according to their

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Compensatory Damages

Money awarded in a civil lawsuit to make an injured person whole, including recompense for damaged property, lost wages or profits, pain, bereavement, medical expenses,

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Competent Party

Under contract law, a party having legal capacity to enter into a contract, e.g., of legal age, mental capacity to understand the contract, and absent

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Conceptual Bidding

Providers are invited to present general proposals, ideas, or concepts for handling the insurance coverage and services without specific pricing of any coverage or service;

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Conditional Receipt

A form normally required to be signed by an agent and given to a prospective life insurance policy insured/owner at the time a new application

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Conflict of Interest

Situation that places one between the duty to the employer and the employee’s own self-interest; including a situation that has the appearance of a conflict

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Consumer-Driven Healthcare

CDHCCDHC or Consumer-Driven Healthcare – Originated in the late 1990’s with the intention of increasing healthcare consumer awareness of the rising cost of healthcare by

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Contestable Clause

A provision in an insurance policy setting forth the conditions and the period of time during which an insurer may contest or void a policy.

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Contract Law

Body of law that governs the performance of a promise. An enforceable contract must have the following four characteristics: competent parties, agreement or assent, legal

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Contractual Liability

LiabilityLegal responsibility or fault. of another party assumed under a contract or agreement, either expressed or implied, as opposed to liability incurred directly, as in

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Controlling

The actions a risk manager takes to assess, regulate, and monitor work-in-progress and completed work; an element of the managerial process.

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Copayment

A flat fee the insured pays each time covered services are provided or prescription drugs are purchased and is paid directly to providers, facilities or

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COPE

A term referring to a building structure’s construction, occupancy, protection and exposure; used by underwriting to determine the risk of offering a policy.

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Corporation

A legal entity considered to be a separate tax and legal entity having an existence that is separate and distinct from its owners.

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Cost Containment

Also known as “managed care”, provides appropriate and adequate medical care consistent with an insured’s healthcare needs, while avoiding unnecessary medical services and related expenses.

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Cost of Capital

Cost associated with various sources of financing to the organization and used to determine which alternative applications of funds are cost effective and should be

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Cost of Goods Sold

1) labor, material, and overhead expenses including inventory shrinkage; 2) the purchasing or production costs and expenses, both direct and indirect, of the merchandise sold

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Cost-of-Living Rider

Policy wording change or form designed to adjust policy benefits in relation to the change in the economic climate. The majority of such riders are

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Covered Expenses

All medical services covered by an insurance policy. Some health insurance plans will have a list of medical services they do not cover.

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COVID-19

COVID-19COVID-19 is a disease caused by a new strain of coronavirus. ‘CO’ stands for corona, ‘VI’ for virus, and ‘D’ for disease. Formerly, this disease

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Credibility

In statistics, relative confidence (statistical reliability) associated with a given body of data (e.g., loss experience for an individual division) and expressed as a number

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Credit Risk

A risk faced by finite risk insurers when paid losses exceed the premium payments made by the insured, either during the policy term or once

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Crisis

Any critical incident that involves death, serious injury, or threat to people; damage to environment, animals, property and/or data; disruption of operations; threat to the

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Crisis Management

Act or process of managing a crisis to prevent the occurrence of a catastrophic loss, if possible, and reduce the impact of catastrophic losses to

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Current Assets

Cash or other assets that will be (or could be) converted into cash or consumed within an organization’s normal operating or accounting cycle (usually the

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Current Ratio

A liquidity ratio that measures the organization’s ability to pay bills over the short term; current assets divided by current liabilities.

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Custodial Care

In health or Long Term Care insurance, the care that is needed for personal needs such as eating, dressing, and bathing, which can be provided

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D-Ratio

Factor used in the workers compensation experience modification plan to separate the expected total losses into primary and excess losses. A D-ratio is the normal

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DART Rate

A Bureau of Labor Statistics measure of injury and illness cases involving days away, restricted duties, or transfer to other duties during a return-to-work phase.

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DB Plan

A plan that traditionally provides lifetime monthly annuity payments to a retiree, typically determined by a formula based on an employee’s personalized factors such as

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DC Plan

A plan that allows participants and plan sponsors (optional) to contribute to a participant’s retirement account within the plan, but does not guarantee a specific

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Debt Ratio

Financial ratios measuring the ability of an organization to repay its creditors over the long term. Also a measure of the degree of leverage, or

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Deferred Compensation

A plan that allows selected individuals to defer receipt of current income in favor of a delayed benefit, in accordance with a written agreement with

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Defined Benefit Plan

A plan that traditionally provides lifetime monthly annuity payments to a retiree, typically determined by a formula based on an employee’s personalized factors such as

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Defined Contribution Plan

A plan that allows participants and plan sponsors (optional) to contribute to a participant’s retirement account within the plan, but does not guarantee a specific

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Depletion

An accounting concept; the reduction in inventory and a charge against income for the use of natural resources, e.g., oil, coal, forest growth.

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Deposit Premium

The basic premium plus the full amount of the premium tax loading on the standard premium plus an escrow amount to provide for the initial

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Development Factor

Factor designed to correct errors when estimating the reserves for known but unsettled losses and to make an allowance for incurred but not reported (IBNRRepresents

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Discount Rate

The organization’s average cost of capital, rate income can be earned, or its weighted cost of capital, commonly referred to as the WACC.

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Discount Ratio

Factor used in the workers compensation experience modification plan to separate the expected total losses into primary and excess losses. A D-ratio is the normal

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Discounted Losses

LiabilityLegal responsibility or fault. estimates that have been reduced to reflect the potential to earn investment on funds set aside to pay losses which have

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Disinterestedness

As related to the Business Judgment RuleSingle most powerful defense available to a director or officer and recognizes that not all decisions of the directors

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Dividends

Distributions to shareholders of a corporation’s earnings. DividendsDistributions to shareholders of a corporation’s earnings. Dividends can also be distributed to policy owners of participating insurance

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Domicile

Legal and regulatory jurisdiction under which an insurance company chooses to be formed and operate.

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Due Care

As related to the Business Judgment RuleSingle most powerful defense available to a director or officer and recognizes that not all decisions of the directors

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Due Diligence

Actions taken to investigate documents and records of a business and/or person prior to examination of a proposed action before it is undertaken, executing a

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Dynamics of Selling

The Dynamics of Selling Series is a multi-day insurance specific sales training course. Designed and taught by leading, insurance sales professionals who are active in

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Earned Premium

Amount of the premium that has been “used up” during the term of a policy; for example, if a one-year policy has been in effect

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Economic Risk

A general class of risk; risks arising from operations, economy, financial marketplace or entrepreneurial activities.

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ELR

When computing workers compensation experience modifications, the factor taken from actuarial tables used to calculate total expected losses for the specific classification given the audited

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Emerging Risk

New exposures to loss for which a risk treatment has not been implemented; existing exposures to loss that are evolving, difficult to quantify and may

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Employee

A person in the service of another under a contract of hire, who acts under the direction and control of the person who hired him/her.

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Employee Retirement Income Security Act of 1974

A federal regulation enacted to protect participants and their beneficiaries. ERISAA federal regulation enacted to protect participants and their beneficiaries. ERISA contains provisions that stand

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Employee Welfare Benefit Plan

Any plan that provides medical care or benefits for sickness, accident, disability, death, unemployment, vacation, training, day care, scholarships, or prepaid legal services, or any

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Endorsement

Used by an insurer to clarify or make revisions to particular provisions of a policy. Also called “riders.”

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Enterprise Risk Management

A systemic process of identifying, analyzing, assessing, and responding to all risks, regardless of the source, that affects the achievement of an organization’s strategic and

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EPO

A network of medical care providers structured in a similar manner to a PPO but have many of the requirements of an HMOProvides a comprehensive

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EPS

After-tax net income divided by number of common shares of stock outstanding.

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Ergonomics

1) the applied science of equipment and workplace design intended to maximize productivity by reducing operator fatigue and discomfort; 2) fitting the work environment to

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ERISA

A federal regulation enacted to protect participants and their beneficiaries. ERISAA federal regulation enacted to protect participants and their beneficiaries. ERISA contains provisions that stand

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ERM

A systemic process of identifying, analyzing, assessing, and responding to all risks, regardless of the source, that affects the achievement of an organization’s strategic and

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Estate Tax

A tax payable to the federal government due to the death of an individual. It is a transfer tax based on the value of owned

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Estimated Premium

Amount of premium charged at the time a policy is issued. The estimated premium based on estimated exposures times the negotiated premium rate. This amount

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Estoppel

Legal concept that holds a party is barred or impeded by his/her own acts from claiming a right to the detriment of another party who

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Ethical

Pertaining to standards of right conduct or practice arising out of ethics. See BusinessIncludes trade, profession, or occupation. ethics.

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Ethics

Moral principles of a group or individual as developed over time and with life experiences.

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Excess Insurance

Insurance protection for limits above those contained in a primary policy or above a self-insured retention. Excess insurance usually does not include a duty to

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Excess Per Occurrence

The reinsurer pays only when the aggregate loss from any one occurrence exceeds the predetermined retention of the ceding company. The primary use of excess

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Excess Premium

PremiumAmount of money an insurance carrier charges to provide the coverage described in the policy…. More that is not a part of a loss sensitive

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Excess Reinsurance

A form of TreatyA form of reinsurance in which a contract of reinsurance automatically establishes the terms for reinsuring a class or classes of business….

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Expected Loss Rate

When computing workers compensation experience modifications, the factor taken from actuarial tables used to calculate total expected losses for the specific classification given the audited

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Expected Losses

Projection of the frequency and/or severity of losses based on loss history, probability distributions, and statistics; the expected loss projection is commonly called a “loss

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Expected Mortality

The expected incidence of death within a given group during a given period of time, as shown in a mortality table developed by actuaries.

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Expense Constant

Expense factor (usually expressed as a dollar amount) added to the premium charged for a class of policies that would otherwise produce insufficient premium to

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Experience Modifier

Factor developed by measuring the difference between the insured’s actual past experience and the expected experience of the class. The factor may be either a

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Experience Rating

A rating that considers the individual loss experience of a particular insured. It applies loss experience to the present policy year. Describes any plan that

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Exposure

A situation, practice or condition that may lead to an adverse financial consequence; an activity or resource; people and assets

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