Glossary of Insurance Terms
Actuary – An individual who analyzes data to calculate insurance premiums.
Assets – Investments which can be valued and included on the insurer’s balance sheet to determine the financial condition of the insurer.
Authorized Insurer – An insurer licensed to do an insurance business in this state.
Claim –A written demand which alleges injury to a person arising from providing or failing to provide professional services.
Claims-Made Policy – Claims-made policy means an insurance policy that covers liability for injury arising out of incidents, acts or omissions occurring during the policy period, as long as the claim is first made during a policy period or any extended reporting period.
Claims Representative- An individual who evaluates claims submitted to the insurer for possible settlement or denial after review of information collected to make an informed decision.
Claim Severity – Claim Severity is the amount of loss associated with an insurance claim.
Claim Frequency – Frequency refers to the number of claims that an insurer expects to see. Often expressed in terms of frequency per exposure unit. For example, number of claims per doctor-year.
Combined Ratio – Combined ratio is determined as the sum of loss and loss adjustment expense ratio and the underwriting expense ratio.
Commission Expense – The fees paid to insurance agents and/or broker by the insurer for placing the policy with the insurer.
Consent to Settle – A clause in the policy which provides that an insurer may not settle any claim without the consent of the insured.
Declaration Page – A page to the policy which identifies the name and address of the named insured, the policy period, the limits of liability, the premium for the policy period and endorsements to the policy, if any.
Defense Counsel – In the insurance context, a law firm selected by the insurance company to defend the insured when the insured is named as a defendant in a lawsuit alleging claims covered by the insurance policy. The insurer pays for the legal services provided by the law firm.
Direct Written Premium – Direct premiums written are the total premiums charged by the insurer for the coverage being provided. It represents the premiums on all policies the Company has issued during a given period of time.
Dividend – Represents profits returned to shareholders in the form a dividend distribution.
Earned Premium – An earned premium is the portion of an insurance premium that applies to the expired portion of an insurance policy.
Endorsement – An endorsement is a policy form that contains material that becomes part of the insurance policy.
Exclusions – A clause in the policy which identifies the risks not covered by the policy.
Expense Ratio – The ratio of company-wide expenses associated with acquiring, underwriting and servicing premiums to total amount of net premium written.
Experience Rating – An experience rating plan considers an individual insured’s loss experience and makes rate adjustments based on that experience.
Gap in Coverage – A period of time during which the insured does not have insurance which can cover a claim.
General Liability Insurance – General Liability policy is a policy which covers claims for bodily injury and property damage caused by an accident, but generally does not cover claims for injury due to professional negligence.
Hammer Clause – A clause in the policy which relieves the insurer of the obligation to pay a jury award when the insured refuses to consent to a settlement that the insurer has negotiated.
Incident –Accident, happening or event which may result in a claim being made against the insured at some future date.
Limit of Liability – Maximum payment the insurer is liable under the policy.
Locum Tenens – One physician temporarily taking the place of another physician and covered under the same policy.
Loss Adjustment Expense (LAE) – Loss adjustment expenses are the insurance company expenses associated with the settlement of claims, as distinguished from the marketing, investment, or general administrative operations.
Loss Ratio – The ratio of claims paid by the insurer to the premium earned during a stated period.
Loss Reserves – Loss reserves as of given accounting date is amount that will ultimately be paid to settle all claim liabilities that have been incurred.
Malpractice –Alleged negligence by a professional in the performance of his or her professional responsibilities.
Medical Malpractice Insurance – Means insurance against legal liability of the insured, and against loss, damage, or expense incident to a claim regarding death or injury of any person due to medical, dental, podiatric, certified nurse-midwifery or hospital malpractice by any licensed physician, dentist, podiatrist, certified nurse-midwife, certified registered nurse anesthetist or hospital.
Occurrence Policy – An insurance policy that covers liability for injury or damage that the insured is legally obligated to pay arising out of incidents, acts or omissions that occurred during the policy period, and where the claim may be made during or subsequent to the policy period.
Premium – The amount to be paid for the insurance policy.
Risk Purchasing Group – Is any group which has as one of its purposes the purchase of liability insurance on a group basis. Purchasing Groups purchase such insurance only for its group members and only to cover their similar or related liability exposure. The Purchasing Group is comprised of members whose businesses or activities are similar or related.
Reciprocal Insurance Exchange – A reciprocal insurer is comprised of individuals, partnerships or corporations that engage in a similar line of business and undertake to indemnify each other against property/casualty losses through the mutual exchange of insurance contracts. The members of a reciprocal insurer are known as “subscribers,”
Reinsurance Policy – An insurance policy between two insurers where the later insurer (the reinsurer) agrees to cover all or part of the claim the former insurer (ceding insurer).
Retroactive (Prior Acts) Coverage – Prior acts coverage, nose or nose coverage means coverage under the policy for injury that occurs prior to the effective date of the policy.
Risk Management –The process of identifying sources of potential losses and taking steps to reduce or eliminate those losses.
Risk Retention Group – Is an association formed pursuant to the federal liability risk retention act of 1986 whose primary activity consists of assuming and spreading all, or any portion, of the liability exposure of its group members. Members of the risk retention group are engaged in similar or related businesses or activities with respect to the liability assumed among such members.
Tail Coverage – Extended reporting period coverage, tail or tail coverage means coverage for that period of time specified in the policy for claims first made after termination of the policy are covered.
Unauthorized Insurer or non-admitted insurer – An insurer not licensed by New York to do business in the state.
Underwriter – Any individual who reviews applications for insurance to determine whether to issue a policy and pricing for the policy.
Vicarious Liability – The liability imposed on a person, whether an entity or individual, for the actions of another person.