Allianz Glossary

Accident - an unexpected event or circumstance without deliberate intent.

Accident Insurance - insurance for unforeseen bodily injury.

Accident Only - an insurance contract that provides coverage, singly or in combination, for death, dismemberment, disability, or hospital and medical care caused by or necessitated as a result of accident or specified kinds of accident.

Accident Only or AD&D - policies providing coverage, singly or in combination, for death, dismemberment, disability, or hospital and medical care caused by or necessitated as a result of accident or specified kinds of accidents. Types of coverage include student accident, sports accident, travel accident, blanket accident, specific accident or accidental death and dismemberment (AD&D).

Accidental Bodily Injury - unexpected injury to a person.

Accidental Death & Dismemberment - an insurance contract that pays a stated benefit in the event of death and/or dismemberment caused by accident or specified kinds of accidents.

Accumulation Period - period of time insured must incur eligible medical expenses at least equal to the deductible amount in order to establish a benefit period under a major medical expense or comprehensive medical expense policy.

Actual Cash Value - repayment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation

Actuarial Report - (PC Insurance)a document or other presentation, prepared as a formal means of conveying to the state regulatory authority and the Board of Directors, or its equivalent, the actuary's professional conclusions and recommendations, of recording and communicating the methods and procedures, of assuring that the parties addressed are aware of the significance of the actuary's opinion or findings and that documents the analysis underlying the opinion. (In Life and Health) this document would be called an "Actuarial Memorandum."

Actuary - business professional who analyzes probabilities of risk and risk management including calculation of premiums, dividends and other applicable insurance industry standards.

Adjuster - a person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.

Admission - hospital inpatient care for any medical condition.

Admitted Assets - insurer assets which can be valued and included on the balance sheet to determine financial viability of the company.

Admitted Company - an insurance company licensed to do business in a state(s), domiciled in an alternative state or country.

Advance Premiums - occur when a policy has been processed, and the premium has been paid prior to the effective date. These are a liability to the company and not included in written premium or the unearned premium reserve.

Adverse Selection - the social phenomenon whereby persons with a higher than average probability of loss seek greater insurance coverage than those with less risk.

Advisory Organization - a group supported by member companies whose function is to gather loss statistics and publish trended loss costs.

Affiliate - a person or entity that directly, or indirectly, through one or more other persons or entities, controls, is controlled by or is under common control with the insurer.

Agent - an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

Aggregate - the maximum dollar amount or total amount of coverage payable for a single loss, or multiple losses, during a policy period, or on a single project.

Aggregate Cost Payments - method of reimbursement of a health plan with a corporate entity that directly provides care, where (1) the health plan is contractually required to pay the total operating costs of the corporate entity, less any income to the entity from other users of services, and (2) there are mutual unlimited guarantees of solvency between the entity and the health plan that put their respective capital and surplus at risk in guaranteeing each other.

Aircraft - coverage for aircraft (hull) and their contents; aircraft owners' and aircraft manufacturers liability to passengers, airports and other third parties.

ALAE - an estimate of the claims settlement associated with a particular claim or claims.

Alien Company - an insurance company formed according to the laws of a foreign country. The company must conform to state regulatory standards to legally sell insurance products in that state.

Allied Lines - coverages which are generally written with property insurance, e.g., glass, tornado, windstorm and hail; sprinkler and water damage; explosion, riot, and civil commotion; growing crops; flood; rain; and damage from aircraft and vehicle, etc.

All-Risk - also known as open peril, this type of policy covers a broad range of losses. The policy covers risks not explicitly excluded in the policy contract.

Alternative Workers' Compensation - other than standard workers' compensation coverage, employer's liability and excess workers' compensation (e.g., large deductible, managed care).

Ambulatory Services - health services provided to members who are not confined to a health care institution. Ambulatory services are often referred to as "outpatient" services.

Annual Statement - an annual report required to be filed with each state in which an insurer does business. This report provides a snapshot of the financial condition of a company and significant events which occurred throughout the reporting year.

Annuitant - the beneficiary of an annuity payment, or person during whose life and annuity is payable.

Annuities – Immediate Non-variable - an annuity contract that provides for the fixed payment of the annuity at the end of the first interval of payment after purchase. The interval may vary, however the annuity payouts must begin within 13 months.

Annuity - a contract providing income for a specified period of time, or duration of life for a person or persons.

Appraisal - an estimate of value.

Arbitration - a binding dispute resolution tactic whereby a conciliator with no interest in the outcome intercedes.

Assessed Value - estimated value for real or personal property established by a taxing entity

Asset - probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. An asset has three essential characteristics: It embodies a probable future benefit that involves a capacity, singly or in combination with other assets, to contribute directly or indirectly to future net cash inflows; A particular entity can obtain the benefit and control others' access to it; and The transaction or other event-giving rise to the entity's right to or control of the benefit has already occurred.

Asset Risk - in the risk-based capital formula, risk assigned to the company's assets.

Assigned Risk - A governmental pool established to write business declined by carriers in the standard insurance market.

Assisted Living Care - a policy or rider that provides coverage only while a policyholder is confined to an assisted living facility and meets the policy requirements for coverage.

Assumed Reinsurance - the assumption of risk from another insurance entity within a reinsurance agreement or treaty.

Authorized Company - an insurer licensed or admitted to do business in a particular state.

Authorized Control Level Risk Based Capital - theoretical amount of capital plus surplus an insurance company should maintain.

Authorized Reinsurance - reinsurance placed with a reinsurer who is licensed or otherwise allowed to conduct reinsurance within a state.

Auto Liability - coverage that protects against financial loss because of legal liability for motor vehicle related injuries (bodily injury and medical payments) or damage to the property of others caused by accidents arising out of ownership, maintenance or use of a motor vehicle (including recreational vehicles such as motor homes). Commercial is defined as all motor vehicle policies that include vehicles that are used primarily in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit. No Fault is defined by the state concerned.

Auto Physical Damage - motor vehicle insurance coverage (including collision, vandalism, fire and theft) that insures against material damage to the insured's vehicle. Commercial is defined as all motor vehicle policies that include vehicles that are used in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit.

Automobile Liability Insurance - coverage for bodily injury and property damage incurred through ownership or operation of a vehicle.

Balance Sheet - accounting statement showing the financial condition of a company at a particular date.

BCEGS - Building Code Effectiveness Grading Schedule - classification system for assessment of building codes per geographic region with special emphasis on mitigation of losses from natural disasters.

Beneficiary - an individual who may become eligible to receive payment due to will, life insurance policy, retirement plan, annuity, trust, or other contract.

Benefits (Medical & Hospital Expenses) - total expenditures for health care services paid to or on behalf of a member.

Blanket coverage - coverage for property and liability that extends to more than one location, class of property or employee.

Boatowners/Personal Watercraft - covers damage to pleasure boats, motors, trailers, boating equipment and personal watercraft as well as bodily injury and property damage liability to others.

Bodily Injury - physical injury including sickness or disease to a person.

Boiler & Machinery or Equipment Breakdown & Machinery - coverage for the failure of boilers, machinery and other electrical equipment. Benefits include (i) property of the insured, which has been directly damaged by the accident; (ii) costs of temporary repairs and expediting expenses; and (iii) liability for damage to the property of others. Coverage also includes inspection of the equipment.

Bonds - a form of debt security whereby the debt holder has a creditor stake in the company. Obligations issued by business units, governmental units and certain nonprofit units having a fixed schedule for one or more future payments of money; includes commercial paper, negotiable certificates of deposit, repurchase agreements and equipment trust certificates.

Book Value - original cost, including capitalized acquisition costs and accumulated depreciation, unamortized premium and discount, deferred origination and commitment fees, direct write-downs, and increase/decrease by adjustment.

Broker - an individual who receives commissions from the sale and service of insurance policies. These individuals work on behalf of the customer and are not restricted to selling policies for a specific company but commissions are paid by the company with which the sale was made.

Builders' Risk Policies - typically written on a reporting or completed value form, this coverage insures against loss to buildings in the course of construction. The coverage also includes machinery and equipment used in the course of construction and to materials incidental to construction.

Burglary and Theft - coverage for property taken or destroyed by breaking and entering the insured's premises, burglary or theft, forgery or counterfeiting, fraud, kidnap and ransom, and off-premises exposure.

Business Auto - coverage for motor vehicles, other than those in the garage business, engaged in commerce. Business auto filings include singularly or in any combination coverage such as the following: Auto Liability, PIP, MP, Uninsured Motorist and/or Underinsured Motorists (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.

Business Interruption - loss of income as a result of property damage to a business facility.

Business owners Policy - business insurance typically for property, liability and business interruption coverage.

Calendar Year Deductible - in health insurance, the amount that must be paid by the insured during a calendar year before the insurer becomes responsible for further loss costs.

Capital and Surplus - a company's assets minus its liabilities.

Capital and Surplus Requirement - statutory requirement ordering companies to maintain their capital and surplus at an amount equal to or in excess of a specified amount to help assure the solvency of the company by providing a financial cushion against expected loss or misjudgments and generally measured as a company's admitted assets minus its liabilities, determined on a statutory accounting basis.

Capital Gains (Loss) - excess (deficiency) of the sales price of an asset over its book value. Calculated on the basis of original cost adjusted, as appropriate, for accrual of discount or amortization of premium and for depreciation.

Capitation Arrangement - a compensation plan used in connection with some managed care contracts where a physician or other medical provider is paid a flat amount, usually on a monthly basis, for each subscriber who has elected to use that physician or medical provider. Capitated payments are sometimes expressed in terms of a "per member/per month" payment. The capitated provider is generally responsible, under the conditions of the contract, for delivering or arranging for the delivery of all contracted health services required by the covered person.

Captive Agent - an individual who sells or services insurance contracts for a specific insurer or fleet of insurers.

Captive Insurer - an insurance company established by a parent firm for the purpose of insuring the parent's exposures.

Carrying Value (Amount) - the SAP book value plus accrued interest and reduced by any valuation allowance and any nonadmitted adjustment applied to the individual investment.

Cash - a medium of exchange.

Cash Equivalent - short-term, highly liquid investments that are both (a) readily convertible to known amounts of cash, and (b) so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Investments with original maturities of three months or less qualify under this definition.

Casualty Insurance - a form of liability insurance providing coverage for negligent acts and omissions such as workers compensation, errors and omissions, fidelity, crime, glass, boiler, and various malpractice coverages.

Catastrophe Bonds - Bonds issued by an insurance company with funding tied to the company's losses from disasters, or acts of God. A loss exceeding a certain size triggers a reduction in the bond value or a change in the bond structure as loss payments are paid out of bond funds.

Catastrophe Loss - a large magnitude loss with little ability to forecast.

Ceded Premium - amount of premium (fees) used to purchase reinsurance.

Ceding Company - an insurance company that transfers risk by purchasing reinsurance.

Centers for Medicare & Medicaid Services (CMS) - U.S. governmental agency responsible for the licensing of federally qualified HMOs. This was formerly the Health Care Financing Administration.

Change in Valuation Basis - a change in the interest rate, mortality assumption or reserving method or other factors affecting the reserve computation of policies in force.

Chartered Life Underwriter (CLU) - a professional designation awarded by the American College to persons in the life insurance field who pass a series of exams in insurance, investment, taxation, employee benefit plans, estate planning, accounting, management, and economics.

Chartered Property Casualty Underwriter (CPCU) - a professional designation awarded by the American Institute of Property and Casualty Underwriters to persons in the property and liability insurance field who pass a series of exams in insurance, risk management, economics, finance, management, accounting, and law. Designates must also have at least three years experience in the insurance business or related field.

Claim - a request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.

Claims Adjustment Expenses - costs expected to be incurred in connection with the adjustment and recording of accident and health, auto medical and workers' compensation claims.

Claims-made Form - A type of liability insurance form that only pays if the both event that causes (triggers)the claim and the actual claim are submitted to the insurance company during the policy term

Class Rating - a method of determining rates for all applicants within a given set of characteristics such as personal demographic and geographic location.

Coinsurance - A clause contained in most property insurance policies to encourage policy holders to carry a reasonable amount of insurance. If the insured fails to maintain the amount specified in the clause (Usually at least 80%), the insured shares a higher proportion of the loss. In medical insurance a percentage of each claim that the insured will bear.

Collar - an agreement to receive payments as the buyer of an Option, Cap or Floor and to make payments as the seller of a different Option, Cap or Floor.

Collateral Loans - unconditional obligations for the payment of money secured by the pledge of an investment.

Collateralized Bond Obligations (CBOs) - an investment-grade bond backed by a pool of low-grade debt securities, such as junk bonds, separated into tranches based on various levels of credit risk.

Collateralized Mortgage Obligations (CMOs) - a type of mortgage-backed security (MBS) with separate pools of pass-through security mortgages that contain varying classes of holders and maturities (tranches) with the advantage of predictable cash flow patterns.

Combinations - a special form of package policy composed of personal automobile and homeowners insurance.

Combined Ratio - an indication of the profitability of an insurance company, calculated by adding the loss and expense ratios.

Commencement Date - date when the organization first became obligated for any insurance risk via the issuance of policies and/or entering into a reinsurance agreement. Same as "effective date" of coverage.

Commercial Auto - coverage for motor vehicles owned by a business engaged in commerce that protects the insured against financial loss because of legal liability for motor vehicle related injuries, or damage to the property of others caused by accidents arising out of the ownership, maintenance, use, or care-custody & control of a motor vehicle. This includes Commercial Auto Combinations of Business Auto, Garage, Truckers and/or Other Commercial Auto.

Commercial Earthquake - earthquake property coverage for commercial ventures.

Commercial Farm and Ranch - a commercial package policy for farming and ranching risks that includes both property and liability coverage. Coverage includes barns, stables, other farm structures and farm inland marine, such as mobile equipment and livestock.

Commercial Flood - separate flood insurance policy sold to commercial ventures.

Commercial General Liability - flexible & broad commercial liability coverage with two major sub-lines: premises/operations sub-line and products/completed operations sub-line.

Commercial Mortgage-Backed Securities - a type of mortgage-backed security that is secured by the loan on a commercial property.

Commercial Multiple Peril - policy that packages two or more insurance coverages protecting an enterprise from various property and liability risk exposures. Frequently includes fire, allied lines, various other coverages (e.g., difference in conditions) and liability coverage. Such coverages would be included in other annual statement lines, if written individually. Include under this type of insurance multi-peril policies (other than farmowners, homeowners and automobile policies) that include coverage for liability other than auto.

Commercial Package Policy - provides a broad package of property and liability coverages for commercial ventures other than those provided insurance through a business owners policy.

Commercial Property - property insurance coverage sold to commercial ventures.

Commission - a percentage of premium paid to agents by insurance companies for the sale of policies.

Community Rating - a rating system where standard rating is established and usually adjusted within specific guidelines for each group on the basis of anticipated utilization by the group's employees.

Company Code - a five-digit identifying number assigned by NAIC, assigned to all insurance companies filing financial data with NAIC.

Completed Operations Liability - policies covering the liability of contractors, plumbers, electricians, repair shops, and similar firms to persons who have incurred bodily injury or property damage from defective work or operations completed or abandoned by or for the insured, away from the insured's premises.

Comprehensive (Hospital and Medical) - line of business providing for medical coverages; includes hospital, surgical, major medical coverages; does not include Medicare Supplement, administrative services (ASC) contracts, administrative services only (ASO) contracts, federal employees health benefit plans (FEHBP), medical only programs, Medicare and Medicaid programs, vision only and dental only business.

Comprehensive General Liability (CGL) - coverage of all business liabilities unless specifically excluded in the policy contract.

Comprehensive Personal Liability - comprehensive liability coverage for exposures arising out of the residence premises and activities of individuals and family members. (Non-business liability exposure protection for individuals.)

Comprehensive/Major Medical - policies that provide fully insured indemnity, HMO, PPO, or Fee for Service coverage for hospital, medical, and surgical expenses. Coverage excludes Short-Term Medical Insurance, the Federal Employees Health Benefit Program and non-comprehensive coverage such as basic hospital only, medical only, hospital confinement indemnity, surgical, outpatient indemnity, specified disease, intensive care, and organ and tissue transplant coverage.

Concurrent Causation - property loss incurred from two or more perils in which only one loss is covered but both are paid by the insurer due to simultaneous incident.

Conditions - requirements specified in the insurance contract that must be upheld by the insured to qualify for indemnification.

Condos - homeowners insurance sold to condominium owners occupying the described property.

Construction and Alteration Liability - covering the liability of an insured to persons who have incurred bodily injury or property damage from alterations involving demolition, new construction or change in size of a structure on the insured's premises.

Contingency Reserves - required by some jurisdictions as a hedge against adverse experience from operations, particularly adverse claim experience.

Contingent Liability - the liability of an insured to persons who have incurred bodily injury or property damage from work done by an independent contractor hired by the insured to perform work that was illegal, inherently dangerous, or directly supervised by the insured

Continuation of Care Requirement - statutory or contractual provision requiring providers to deliver care to an enrollee for some period following the date of a Health Plan Company's insolvency.

Continuing Care Retirement Communities - senior housing arrangements that in addition to housing include some provision for skilled nursing care.

Contract Reserves - reserves set up when, due to the gross premium structure, the future benefits exceed the future net premium. Contract reserves are in addition to claim and premium reserves.

Contractual Liability - liability coverage of an insured who has assumed the legal liability of another party by written or oral contract. Includes a contractual liability policy providing coverage for all obligations and liabilities incurred by a service contract provider under the terms of service contracts issued by the provider.

Convertible Term Insurance Policy - an insurance policy that can be converted into permanent insurance without a medical assessment. The insurer is required to renew the policy regardless of the health of the insured subject to policy conditions.

Coordination of Benefits (COB) - provision to eliminate over insurance and establish a prompt and orderly claims payment system when a person is covered by more than one group insurance and/or group service plan.

Copay - a cost sharing mechanism in group insurance plans where the insured pays a specified dollar amount of incurred medical expenses and the insurer pays the remainder.

Corrective Order - commissioner's directive of action to be completed by an insurer.

Covered Lives - The total number of lives insured, including dependents, under individual policies and group certificates.

Credit - individual or group policies that provide benefits to a debtor for full or partial repayment of debt associated with a specific loan or other credit transaction upon disability or involuntary unemployment of debtor, except in connection with first mortgage loans.

Credit – Assumption Agreement - an insurance certificate issued on an existing insurance contract indicating that another insurer has assumed all of the risk under the contract from the ceding insurance company.

Credit - Credit Default - coverage purchased by manufacturers, merchants, educational institutions, or other providers of goods and services extending credit, for indemnification of losses or damages resulting from the nonpayment of debts owed to them for goods or services provided in the normal course of their business.

Credit – Involuntary Unemployment - makes loan/credit transaction payments to the creditor when the debtor becomes involuntarily unemployed.

Credit Accident and Health (group and individual) - coverage provided to or offered to borrowers in connection with a consumer credit transaction where the proceeds are used to repay a debt or an installment loan in the event the consumer is disabled as the result of an accident, including business not exceeding 120 months duration.

Credit Disability - makes monthly loan/credit transaction payments to the creditor upon the disablement of an insured debtor.

Credit Health Insurance - policy assigning creditor as beneficiary for insurance on a debtor thereby remitting balance of payment to creditor should the debtor become disabled.

Credit Involuntary Unemployment - credit insurance that provides a monthly or lump sum benefit during an unpaid leave of absence from employment resulting from specified causes, such as layoff, business closure, strike, illness of a close relative and adoption or birth of a child. This insurance is sometimes referred to as Credit Family Leave.

Credit Life Insurance - policy assigning creditor as beneficiary for insurance on a debtor thereby remitting balance of payment to creditor upon death of debtor.

Credit Personal Property Insurance - insurance written in connection with a credit transaction where the collateral is not a motor vehicle, mobile home or real estate and that covers perils to the goods purchased through a credit transaction or used as collateral for a credit transaction and that concerns a creditor's interest in the purchased goods or pledged collateral, either in whole or in part; or covers perils to goods purchased in connection with an open-end transaction.

Credit Placed Insurance - insurance that is purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss, expense or damage to property as a result of fire, theft, collision or other risks of loss that would either impair a creditor's interest or adversely affect the value of collateral. "Creditor Placed Home" means "Creditor Placed Insurance" on homes, mobile homes and other real estate. "Creditor Placed Auto" means insurance on automobiles, boats or other vehicles.

Credit Risk - part of the risk-based capital formula that addresses the collectability of a company's receivables and the risk of losing a provider or intermediary that has received advance capitation payments.

Creditor-Placed Auto - single interest or dual interest credit insurance that is purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss to property that would either impair a creditor's interest or adversely affect the value of collateral on automobiles, boats, or other vehicles.

Creditor-Placed Home - single interest or dual interest credit insurance purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss to property that would either impair a creditor's interest or adversely affect the value of collateral on homes, mobile homes, and other real estate.

Crop - coverage protecting the insured against loss or damage to crops from a variety of perils, including but not limited to fire, lightening, loss of revenue, tornado, windstorm, hail, flood, rain, or damage by insects.

Crop-Hail Insurance - coverage for crop damage due to hail, fire or lightning.