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General
CAS.
See Casualty Actuarial Society.
CPCU.
See Chartered Property and Casualty Underwriter.
CUNA.
Credit Union National Association.
Calendar Year Experience.
This measures the premiums and losses entered on accounting records during
the 12-month calendar.
Cancelable.
A contract of insurance that may be terminated by the insurer or insured
at any time. Practically every form of insurance is cancelable, except Life
Insurance and those Health Insurance policies designated as a "guaranteed
renewable" or "noncancelable and guaranteed renew-able."
Some states also regulate when or if Automobile policies can be cancelled.
Cancellation.
Termination of a contract of insurance in force by voluntary act of the
insurer or insured in accordance with the provisions in the contract or
by mutual agreement.
Cancellation, Flat.
See Flat Cancellation.
Cancellation, Pro Rata.
See Pro Rata Cancellation.
Cancellation.
Short-Rate. See Short Rate Cancellation.
Capacity.
The largest amount of insurance or reinsurance available from a company.
In a broader sense, it can refer to the largest amount of insurance or reinsurance
available in the marketplace.
Capital Stock.
The shares of ownership in a corporation.
Capital Stock Insurer.
See Stock Insurer.
Capital Sum.
The maximum lump sum payable in the event of accidental death or dismemberment.
Capital Transaction.
The sale of a capital asset, such as stock, which results in the transaction
being taxed as ordinary income and not as a dividend.
Captive Agent.
One who sells insurance for only one company as opposed to an agent who
represents several companies. See also Exclusive Agency System.
Captive Insurer.
A legally recognized insurance company organized and owned by a corporation
or firm whose purpose is to use the captive to write its own insurance at
rates lower than those of other insurers. Usually it is a nonadmitted insurer
that has the right, under special circumstances, to reinsure with an admitted
insurer.
Carrier.
Sometimes used to designate the insurer. The term "insurer" is
preferred because of the possible confusion of "carrier" with
transportation. See also Insurer.
Cash Flow Plans.
Premium payment schemes which allow the insured to retain a large part of
the premium and pay it out over a time period such as a year.
Cash Flow Underwriting.
The use of rating and premium collection techniques by insurance companies
to maximize interest earnings on premiums.
Cash Value.
See Actual Cash Value.
Catastrophe Hazard.
The hazard of large loss by reason of occurrence of a peril to which a very
large number of insureds are subject. An example would be widespread loss
due to a hurricane or tornado.
Caveat Emptor.
Let the buyer beware.
Certificate.
See Certificate of Insurance or Participation.
Certificate of Authority.
(1) A certificate showing the powers that an insurer grants to its agents.
(2) A certificate issued by a state department of insurance showing the
power of an insurer to write contracts of insurance in that state.
Certificate of Convenience.
A term used in some jurisdictions to refer to a temporary license or permit
empowering a person to act as an agent even though not fully licensed according
to the law. Usually this certificate is granted to an agent who is studying
for a licensing examination. It might also be issued to the administrator
or executor of the estate of an insurance agent, who must have the authority
of an agent to settle the estate, or to someone acting for an agent during
a disability or an absence such as military duty.
Certificate of Insurance.
(1) A statement of the coverage and provisions of a master contract in group
insurance that is issued to individuals covered in the group. (2) A form
which verifies that a policy has been written and states the coverage in
general, often used as proof of insurance in loan transactions and for other
legal requirements.
Charter.
Usually the same as articles of incorporation. This is the grant of rights
from a state or federal government, such as the right to incorporate and
transact business.
Chattel Mortgage.
A type of mortgage where the collateral is personal property, rather than
land or buildings.
Claim.
A demand made by the insured, or the insured's beneficiary, for payment
of the benefits provided by the contract.
Claim Expense.
The expense of adjusting a claim, such as investigation and attorneys' fees.
It does not include the cost of the claim itself.
Claim Report.
A report filed by an agent setting forth the facts of a claim. Same as Loss
Report.
Claim Representative.
See Adjuster.
Claimant.
The person making a demand for payment of benefits.
Claims Reserve.
Amounts set aside to meet costs of claims incurred but not yet finally settled.
An example might be a Workers Compensation case where benefits are payable
for several years. At any given point in time, the reserve would be the
funds kept based on the estimate of what the claim will cost when finally
settled.
Class (or Classification).
A group of insureds having the same characteristics and who are, therefore,
grouped together for rating purposes. Class rates apply to dwellings and
apartments, since they usually have the same characteristics and are exposed
to the same perils.
Clause.
A section of a policy contract or endorsement dealing with a particular
subject. For instance, a Subrogation Clause deals with the rights of the
insurer in the event of payment of a loss under the contract.
Close Corporation.
A corporate form of business controlled and operated by a small, close group
of persons such as family members. The corporation's stock is not sold to
outsiders.
Coding.
A method of putting information into a numerical form for statistical use.
Most information on policies is coded and then put into reports.
Coercion.
An unfair trade practice which occurs when someone in the insurance business
applies a physical or mental force to persuade another to transact insurance.
Collusion.
An agreement, usually secret, between two or more persons to defraud or
deprive another or others of their property or rights.
Combined Ratio.
The sum of an expense ratio and a loss ratio. An underwriting profit occurs
when the combined ratio is under 100% and an underwriting loss occurs when
the combined ratio is over 100%.
Commercial Lines.
This term is used to refer to insurance for businesses, professionals, and
commercial establishments. See also Business Insurance. Contrast with Personal
Lines.
Commercial Package Policy (CPP).
A commercial lines policy that contains more than one of the following coverage
parts: Commercial Property, Commercial Liability, Commercial Inland Marine,
Commercial Crime, Boiler and Machinery Insurance, Commercial Automobile
Insurance, and Farm Coverage.
Commingling.
An illegal practice which occurs when an agent mixes personal funds with
the insured's or insurer's funds.
Commission.
That portion of the premium paid to the agent as compensation for his services.
See also First Year Commission, Renewal Commission, Level Commission System,
Unlevel Commission System, Contingent Commission and Graded Commission.
Commission of Authority.
A document outlining the powers delegated to an agent by an insurer.
Commissioner of Insurance.
The title of the head of most state insurance departments. In some states,
the title Director or Superintendent of Insurance is used instead.
Commissioners' Values.
An annual list of securities published by the NAIC. The values are to be
used in recording security values on insurance company balance sheets.
Common Law Liability.
Responsibility based on common law for injury or damage to another's person
or property which rests on an individual because of his actions or negligence.
This is opposed to liability based on statutory law.
Common Policy Conditions.
Under the latest commercial lines program, a form including six common conditions
which apply to all coverage parts attached to a commercial policy.
Common Policy Declarations.
Under the latest commercial lines program, a common declaration page which
is part of every commercial policy. It shows information applicable to the
entire policy (policy number, insurer, insured, total premium, forms attached,
etc.). Each individual coverage part may also have its own declarations
page.
Contingency Surplus.
See Contingency Reserve.
Contingent Fund.
A reserve to cover possible liabilities resulting from an unusual happening.
Continuing Education Requirement.
State-level requirement that insurance licensees periodically complete a
minimum number of hours of insurance-related education in order to be eligible
for license renewal.
Contract.
(1) An agreement entered into by two or more persons under which one or
more of them agree, for a consideration, to do or refrain from doing acts
in accordance with the wishes of the other party(s). (2) In insurance, the
agreement by which an insurer agrees, for a consideration, to provide benefits,
reimburse losses or provide services for an insured. A "policy"
is the written statement of the terms of the contract. (3) An agreement
under which an agency or agent does business with an insurer.
Contribution Clause.
See Coinsurance Clause. Both are similar in effect, but the term Contribution
Clause is identified mostly with Business Interruption forms.
Controlled Business.
This term refers to the amount of insurance countersigned, issued or sold
by a producer covering the life, property or interests of that producer,
members of the producer's immediate family, or the producer's employer or
employees. Many states limit the amount of controlled business that may
be written, and if the premium or commissions on controlled business exceed
a given percentage (usually 50%) of all business, the producer's license
may be suspended, revoked, or not renewed.
Controlled Insurance.
(1) See Control. See Control Provision. An insurance account that an agent
or broker can control by virtue of his influence with the buyer, as contrasted
with controlling it by actual agreement.
Convention.
(1) An adjective, as in convention blank, derived from the original name
for the National Association of Insurance Commissioners, which was the National
Convention of Insurance Commissioners. (2) A gathering of persons, such
as personnel of an insurer or members of a trade association, for the purpose
of conducting business and/or receiving instruction and sales ideas.
Convention (or Statement) Blank.
The uniform annual financial statement required by all United States
insurance jurisdictions as prescribed by the National Association of Insurance
Commissioners. It must be filed annually in an insurer's home state and
every state in which it is licensed to do business. Nearly all insurance
accounting practices are geared to it.
Convention Examination.
A periodic audit of the books of an insurer by the state in which it is
domiciled. Usually such an examination is conducted by the state insurance
department with the assistance of representatives from several other state
insurance departments.
Convention Values.
Values assigned to insurers' assets in the convention blank.
Conversion.
(1) Wrongful use of property by one in lawful possession of it. (2) Change
of one policy form to another, usually without evidence of insurability.
This usually refers to Life or Health Insurance contracts.
Cooperative Insurance.
Insurance issued by a mutual association such as a fraternal society, an
employee association, an industrial association, or a trade union.
Countersignature.
The signature of a licensed agent or representative on a policy.
Countrywide Rates.
For each major division of the Commercial Lines Manual, a section called
"Countrywide Rates" contains rates and minimum premiums. State
rates are used for coverages for which there are no countrywide rates, or
to modify countrywide rates.
Countrywide Rules.
For each major division of the Commercial Lines Manual, a section called
"Countrywide Rules" contains rules and rating factors applicable
to coverages in that division.
Court Bond.
Any bond required of a litigant to enable him to pursue a remedy in court.
Cover.
(1) A contract of insurance. (2) To effect insurance, that is, to "cover"
an insured, for instance, for Automobile Insurance effective as of a given
time. (3) To include within the coverage of a contract of insurance. For
example, one could "cover" additional buildings under a Property
Insurance contract.
Cover Note.
Similar to a binder, but binders are usually issued by companies and delivered
to agents. A Cover Note is usually written by an agent, and it informs the
insured that coverage is in effect. See also Binder. In reinsurance, a Cover
Note is a statement issued by an intermediary or broker indicating that
coverage has been affected.
Coverage.
The scope of the protection provided under a contract of insurance.
Coverage Part.
Any one of the individual commercial coverage parts that may be attached
to a commercial policy. Under the latest commercial lines program, a coverage
part may be issued as monoline policy or may be combined with others as
part of a package policy.
Covered Loss.
Illness, injury, death, property loss, legal liability, or any other situation
or loss for which an insurance company will pay benefits under a policy
when such event occurs.
Credit Report.
A confidential report made by an independent individual or organization
that has investigated the reputation and record of an applicant for insurance.
Criticism.
A correction suggested by a rating or auditing bureau to an insurer.
Currently Insured Status.
A provision of OASDHI. The requirements for being "currently insured"
are less than those for being "fully insured," and the former
entitles a worker's dependents to survivor benefits in the event of his
death. Contrast with Fully Insured.
Cut Rate.
This term generally applies to insurance companies who charge premiums below
a normal or average rate.
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