Any of several kinds of insurance personnel who place insurance business with insurers and who represent either insurers or insureds, or both.
In the agency relationship, the party that is authorized by the principal to act on the principal's behalf.
A legal, consensual relationship that exists when one party, the agent, acts on behalf of another party, the principal.
The party in an agency relationship that authorizes the agent to act on that party's behalf.
The authority implicitly conferred on an agent by custom, usage, or a principal's conduct indicating intention to confer such authority.
The authority that the principal specifically grants to the agent.
Authority (express or implied) conferred by the principal on an agent under an agency contract.
An insurance agent's authority to effect coverage on behalf of the insurer.
A third party's reasonable belief that an agent has authority to act on the principal's behalf.
A business, operated for the benefit of its owner (or owners) that sells insurance, usually as a representative of several unrelated insurers.
An independent producer who represents insurance customers.
Agency expiration list
The record of an insurance agency's present policyholders and the date their policies expire.
Independent agency network
A group of agencies that contractually link to share services, resources, and insurers to gain advantages normally available only to large regional and national brokers.
Managing general agent (MGA)
An authorized agent of the primary insurer that manages all or part of the primary insurer's insurance activities, usually in a specific geographic area.
Exclusive agency marketing system
An insurance marketing system under which agents contract to sell insurance exclusively for one insurer (or for an associated group of insurers).
Direct writer marketing system
An insurance marketing system that uses sales agents (or sales representatives) who are direct employees of the insurer.
Mixed marketing system
An insurer's use of more than one marketing system or distribution channel.
Contacting a prospect without an appointment.
A report detailing an insured's history of claims that have occurred over a specific period, valued as of a specific date.
A payment procedure in which a producer sends premium bills to the insured, collects the premium, and sends the premium to the insurer, less any applicable commission.
A payment procedure in which the insurer assumes all responsibility for sending premium bills to the insured, collecting the premium, and sending any commission payable on the premium collected to the producer.
A percentage of the premium that the insurer pays to the agency or producer for new policies sold or existing policies renewed.
Contingent commission agreement
A contract provision in which an insurer agrees to make supplemental payments to producers based on profitability alone or on a combination of profitability, volume, and growth in the agency's book of business placed with that insurer.
A group of policies with a common characteristic, such as territory or type of coverage, or all policies written by a particular insurer or agency.
In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.
The amount of business an insurer is able to write, usually based on a comparison of the insurer's written premiums to its policyholders' surplus.
The scope of decisions than an underwriter can make without receiving approval from someone at a higher level.
Underwriting guidelines (underwriting guide)
A written manual that communicates an insurer's underwriting policy that specifies the attributes of an account that an insurer is willing to insure.
Underwriter who is primarily responsible for implementing the steps of the underwriting process.
Underwriter who is usually located in the home office and who assists underwriting management with making and implementing underwriting policy.
Underwriting policy (underwriting philosophy)
A guide to individual and aggregate policy selection that supports an insurer's mission statement.
An independent organization that works with and on behalf of insurers that purchase or subscribe to its services.
Prospective loss costs
Loss data that are modified by loss development, trending, and credibility processes, but without considerations for profit and expenses.
A statistical technique for analyzing environmental changes and projecting such changes into the future.
The increase or decrease of incurred losses over time.
A reinsurance agreement that covers an entire class or portfolio of loss exposures and provides that the primary insurer's individual loss exposures that fall within the treaty are automatically reinsured.
Reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer, and the reinsurer can accept or reject any loss exposures submitted.
A review of underwriting files to ensure that individual underwriters are adhering to underwriting guidelines.
Expert systems, or knowledge-based systems
Computer software programs that supplement the underwriting decision-making process. These systems ask for the information necessary to make an underwriting decision, ensuring that no information is overlooked.
A tangible characteristic of property, persons, or operations that tends to increase the frequency or severity of loss.
A condition that increases the frequency or severity of a loss.
Morale hazard (attitudinal hazard)
A condition of carelessness or indifference that increases the frequency or severity of loss.
A condition that increases the likelihood that a person will intentionally cause or exaggerate a loss.
A condition of the legal environment that increases loss frequency or severity.
The balance that underwriters must maintain between the hazards presented by the account and the information needed to underwrite it.
Statistical and analytical techniques used to develop models that predict future events or behaviors.
A type of computer program that estimates losses from future potential catastrophic events.
A process in which historical data based on behaviors and events are blended with multiple variables and used to construct models of anticipated future outcomes.
A proposal an offeree makes to an offeror that varies in some material way from the original offer, resulting in rejection of the original offer, and constituting a new offer.
A rating plan that adjusts the premium for the current policy period to recognize the loss experience of the insured organization during past policy periods.
A rating plan that awards debits and credits based on specific categories, such as the care and condition of the premises or the training and selection of employees, to modify the final premium to reflect factors that the class rate does not include.
A ratemaking technique that adjusts the insured's premium for the current policy period based on the insured's loss experience during the current period; paid losses or incurred losses may be used to determine loss experience.
Mix of business
The distribution of individual policies that compose the book of business of a producer, territory, state, or region among the various lines and classifications.
A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued.
Certificate of insurance
A brief description of insurance coverage prepared by an insurer or its agent and commonly used by policyholders to provide evidence of insurance.
The price per exposure unit for insurance coverage.
A resource for classifying accounts and developing premiums for given types of insurance; includes necessary rules, factors, and guidelines to apply those rates.
Exposure unit (unit of exposure)
The unit of measure (for example, area, gross receipts, payroll) used to determine an insurance policy premium.
The process insurers used to calculate insurance rates, which are a premium component.
A person who uses mathematical methods to analyze loss data and develop insurance rates.
The portion of the rate that covers projected claim payments and loss adjusting expenses.
Insurance advisory organization
An independent corporation that works with and on behalf of insurers that purchase or subscribe to their services, which include developing prospective loss costs and standard policy forms.
Law of large numbers
A mathematical principle stating that as the number of similar but independent exposure units increases, the relative accuracy of predictions about future outcomes (losses) also increases.
A provision in an insurance rate for losses that could not be anticipated in the loss data.
A rating approach that uses rates reflecting the average probability of loss for businesses within large groups of similar risks; the predominant method used for rating commercial properties.
Individual rate, or specific rate
A type of insurance rate that reflects the unique characteristics of an insured or the insured's property.
Rating used by underwriters to rate one-of-a-kind risks.
The price per exposure unit determined by adjusting the prospective loss costs for expenses, profits, and contingencies.
A demand by an insured person or organization seeking to recover from its insurer for a loss that its insurance policy may cover.
A demand against an insured by a person or organization other than the insured or the insurer, seeking to recover damages that may be payable by the insured's liability insurance.
A party that makes a claim and that can be either a first-party claimant or a third-party claimant.
A person responsible for investigating, evaluating, and settling claims.
Third-party administrator (TPA)
An organization that provides administrative services associated with risk financing and insurance.
An independent claim representative who handles claims for insurers for a fee.
An outside organization or person hired by an insured to represent the insured in a claim in exchange for a fee.
A signed agreement indicating that during the course of investigation, neither the insurer nor the insured waives rights under the policy.
Reservation of rights letter
An insurer's letter that specifies coverage issues and informs the insured that the insurer is handling a claim with the understanding that the insurer may later deny coverage should the facts warrant it.
The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.
An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a mutually agreeable settlement.
An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a settlement, which can be final and binding.
A method of resolving disputes between insurers and insureds over the amount owed on a covered loss.
An alternative dispute resolution method by which a case undergoes an abbreviated version of a trial before a panel or an adviser who poses questions and offers opinions on the outcome of a trial, based on the evidence presented.
Summary jury trial
An alternative dispute resolution method by which disputing parties participate in an abbreviated trial, presenting the evidence of a few witnesses to a panel of mock jurors who decide the case.
An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred.
Actual cash value (ACV)
Cost to replace property with new property of like kind and quality less depreciation.
The reduction in value caused by the physical wear and tear or technological or economic obsolescence of property.
The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation.
Agreed value method
A method of valuing property in which the insurer and the insured agree, at the time the policy is written, on the maximum amount that will be paid in the event of a total loss.
The insurer's rights to recover and sell or otherwise dispose of insured property on which the insurer has paid a total loss or a constructive total loss.
Constructive total loss
A loss that occurs when the cost to repair damaged property plus its remaining salvage value equals or exceeds the property's pre-loss value.
Money claimed by, or a monetary award to, a party who has suffered bodily injury or property damage for which another party is legally responsible.
A payment awarded by a court to reimburse a victim for actual harm.
A form of compensatory damages that awards a sum of money for specific, identifiable expenses associated with the injured person's loss, such as medical expenses or lost wages.
A monetary award to compensate a victim for losses, such as pain and suffering, that do not involve specific measurable expenses.
Punitive damages (exemplary damages)
A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need not bear any relation to a party's actual damages.