Insurance is littered with jargon, we hope the following is useful
Accident & Sickness Insurance.
covers you in the event of an injury or death., either on a weekly
benefit basis up to a specified time limit or it will provide you with
a capital sum if you loose a limb etc. To Accident Insurance, you can
usually add Sickness cover. The cost of the covers depends on your
Act of God –
An act of god is an event that is not the fault of any individual.
such as a Storm or a Tempest or Lightning. Acts of God can be
insurable and you used refer to your policy document to see if a
particular peril is covered or not
An Actuary is a professional person qualified to apply
mathematical principles to solving long-term financial problems, they
are employed by insurance companies in particular life insurance
companies to help calculate life expectancy tables and to calculate
Additional Premium -
A extra premium payable by the insured as a result of a change to
an existing policy. Additional premiums are usually charged if the
insurer calculates that the risk has increased. Frequently disclosing
convictions to a motor insurer can result in extra premium being
Additional Voluntary Contribution (AVC) - An additional
contribution made By a pension scheme member to his pension plan to
help boost the final payout.
This is a person or a company who acts for one or a
number of insures when selling insurance products. Agents tend to deal
with only a small number of insurers. Larger concerns tend to refer to
themselves as Brokers or Intermediaries
is the maximum amount an insurer will pay under an insurance policy in
respect of all accumulated claims arising within a specified period of
insurance. So if the aggregate limit of Indemnity is £5,000,000 that
is the maximum the insurer will pay out for claims arising within the
Aggregate Limit of Indemnity –
All Risks Insurance.
This usually refers to an extension under a Home Contents Insurance
policy and provides wider cover for such things as jeweler &
Cameras ( Items taken out of the Home)
The terms is also used in other policies to indicate cover that is
wider than the normal. Whilst the term All Risks would indicate that
everything is covered, this is not the case and a list of exclusions
should also be studied.-.
is a term used by a life assurance company for a product where they
will someone a regular income, usually for life, in return for a lump
sum payment. There are many different types of annunity and expert
advice should always be sought to help you decide between products.
- A firm or an individual
who acts as agent for a ‘principal’ (usually a larger broker or
insurer) that is itself authorized by the FSA and that accepts
responsibility for the representative’s activities. From 15th
January 2005 anyone wishing to transact insurance business in the
United Kingdom has to be authorized and regulated by The Financial
Assistance - The provision by an insurer or an appointed
service company of immediate help to resolve an insured problem ,
Assistance covers tend to deal with emergency situations which may
happen as a result of a motor accident or perhaps an injury or illness
insurance company that is authorized under the Insurance Companies Act
1982 to carry on one or more classes of insurance business in the UK,
and supervised by the Financial Services Authority. If you are wooried
about dealing with a particular insurance company, you may check their
details on the Financial Services Authority Web Site
Authorized Insurer -
use Average clauses to deal with incidents of under insurance. If you
have a claim and the insurers calculates that you are underinsured,
your claim may be reduced in direct proportion to the amount of under
Beneficiary – Someone who may be named in a particular legal
document or insurance policy that will receive a benefit from the
policy if a claim is made
Benefit - The money paid by an Insurance company when a claim
is made. This is usually made by a life insurance company but benefits
would also be paid by a Personal Accident & Sickness Insurer for
by which an insured person has to make a contribution to his or her
own claim because there property was in a better condition after the
event than it was before. Sometimes an insurer will ask for a
betterment contribution towards damaged tyres in a motor accident or
if his property was in a poor state of repair prior to the accident or
is the price you will obtain when you sell units in an investment
fund. Bid prices are usually obtained in most daily newspapers
although of course they will be for the previous days trading.
Bid / Offer - people buying units in an investment fund will
pay the ‘offer’ price. Customers selling units get the lower ‘bid’
Depending on the type and volatility of the fund, the
"spread" can be sometimes quite large
- Amount of money to be added to the guaranteed
part of the sum insured of a With Profit Insurance policy. Bonus’s
can be added at different times throughout the lifetime of a contract
either during the policy term or at the end of it
Broker (Insurance) A broker will act as an Intermediary for his
clients in placing insurance contracts with Insurers or other Brokers.
He will usually receive a commission for his work and may also charge
a fee. If any fees are charged these will have to be disclosed before
the contract is concluded.
Buildings Insurance Policy-This
terms usually relates to insurance for a domestic dwelling house but
the term can equally apply to insurances of Commercial premises etc.
Most domestic policies cover a range of perils to satisfy lenders
conditions and can be extended to suit individual requirements.
Business Interruption –This
is a section of a Business Insurance policy that will cover the loss
of profits of a business following an insured peril occurring at any
is the process whereby units are cancelled to pay for certain expenses
of unit-linked funds. The term also applies to any other type of
insurance contract where the contract is cancelled in its entirety and
ceases to have any effect. If the policy is cancelled and there have
been no claims during the current period of insurance, it is usually
to allow some form of return of premium.
relates to an insurers ability to write insurance business. The larger
the capacity the larger the book of business the insurer will be able
To increase it’s capacity, an insurer will have to demonstrate that
it has adequate reserves to meet any potential losses.
insurance company set up by another insurance company with a specific
purpose, usually to write a particular insurance risk or to insurer a
Captive Insurer -
The amount you may possibly receive if you
decide to cancel an insurance investment and request a cash payout.
Cash-in value -
CAT Standards – The term CAT stands for for Charges,
Access and Terms.
These standards were introduced by the Government with regard to ISAs.
CAT standards are designed to help you choose between products
Certificate – There are various certificates of insurance and
insurers to provide documentary evidence of insurance produce them.
Some, like Certificates of Motor Insurance are required to tax a
vehicle and to show to the police as evidence of insurance. Employers
Liability certificates have to be displayed where employees can see
them, you may be fined for not displaying an employers liability
– An insured
event under a policy may lead to a claim. The policyholder will
contact his or her insurance company , inform them of the incident
that has occurred and seek to receive compensation in line with the
policy terms and conditions.
Claim Frequency -
number of claims made per policy year. Insurers pay special attention
to claims frequency and if they believe you are claiming too often,
they may refuse to insure you.
This is a computerised register of information shared by most
insurance companies and the police. Insurers may search the database
if they believe someone is submitting a fraudulent claim or to check
underwriting information. By accepting a policy with an insurer you
will almost certainly be agreeing to allow your details to be placed
on the exchange. This system helps to reduce fraudulent claims, which
is turn, should help to keep everyone’s premiums down.
Claims and Underwriting Exchange –
This is an
arrangement whereby a number of insurers will share a particular risk-
this usually happens in the case of large risks where insurers will
each share a part of the risk.
Commercial Business –
term usually relates to insurance taken out by a business. The covers
are quite various and can be tailored made to suit almost any business
be it a shop, restaurant, office etc..
Commissions – these terms relates to monies paid to an agent
or broker or intermediary for selling a particular insurers products.
Commissions vary greatly from product to product and in some cases,
you may be entitled to know what is being earned from your policies.
Often the person arranging your insurance wilkl charge fees as well as
receiving a commission, this should be disclosed to you
Company Agents – This
is a term given to persons selling insurance on behalf of one or a
small number of companies. These Agents tend not to be employed by the
companies and act as self-employed agents.
Composite Insurer – The name given to an insurer that
transacts both life and non life insurance policies.
This term is usually applied to
private Car Insurance and represents the widest cover you can buy. It
does not however mean that everything is covered and you should study
your policy document carefully.
Comprehensive Insurance –
inserted in to insurance policy wordings by insurers and the
policyholder must follow these conditions if a claim is to be
considered valid. An example of a policy condition would be the
requirement to fit special locks to windows and doors under a home
term usually relates to items in a private dwelling house although of
course Contents Insurance is available for any type of business.
Contents Policy –
Someone who is contracted out of the State Second Pension (S2P),
formerly known as the State Earnings-Related Pension Scheme (SERPS).
Contribution - The principle of contribution will apply where a
risk is insured on more than one insurance policy. An examplw would be
a watch lost on holiday, The watch may be covered by both a Travel
& a Home Insurance Policy. In this case both insurers will pay
towards the loss.
Convertible Term -
This relates to a Life Insurance contract where the policyholder is
able to alter the term of the policy
giving temporary evidence of cover while the policy and certificate
are being prepared. Cover notes are usual in motor insurance where
evidence may be required by the police and to obtain road tax.
Cover Note -
of insurance to protect a business against financial losses caused by
the insolvency or default of their customers to whom credit has been
Credit Insurance -
Insurance policy which will provide protection against the inability
to repay a loan, a credit card balance or a mortgage.
Creditor Insurance -
Critical Illness Insurance - An insurance policy where the
insurer will pay the sum insured in the form of a lump sum to the
policyholder in the event of diagnosis of a life threatening disease.
The insurers have a standard set of diseases that they will provide
cover for they include; cancer, heart attack, stroke, coronary artery
disease, kidney failure, paralysis, a major organ transplant, heart
valve surgery, multiple sclerosis, blindness in both eyes, total and
permanent disability, loss of hearing, stage one Hodgkin’s disease,
terminal illness, AIDS but only via infected blood transfusion.
- A policy taken out by an
employer to pay a benefit to the estate of an employee if they were to
die during their employment.
Death in Service Benefit
The payout is usually calculated as a multiple of the persons
insurance policy in which the sum insured payable reduces
steadily every year, decreasing to nothing at the end of the
term. This type of policy is usually taken out to cover a debt.
Decreasing Term -
Deductible - The specified amount a loss must exceed before a
claim is payable. Amounts above the deductible up to the policy limit
are payable. Deductibles are usually called a policy excess. A typical
excess on a motor insurance policy would be £50.00
This is an annuity which starts after
a specified number of years or at a specified age (usually on
retirement), usually continuing through the policyholder's life time.
Deferred Annuity –
Direct Insurance is sold without the intervention
of an Insurance Intermediary such as a broker. A large proportion of
insurance is sold on a direct basis nowadays, claiming to offer
cheaper premiums by cutting out the middleman
Certain life insurance policies will pay out if the policyholder
becomes permanently disabled. .
Disability Benefit -
Employers’ Liability -
Liability is a compulsory type of insurance designed to protect
employees. All employers are obliged to take out this form of
insurance and the definition of an employee is very wide.
policy endorsement alters the scope of cover under an insurance
policy. It is usually used to restrict cover but can also be used to
increase cover if required. Always study policy endorsements most
A life insurance policy which will pay a sum
of money after an agreed period of time. This type of policy used to
be a popular method of repaying a mortgage. The policy will also pay
out if death occurs before the end of the agreed policy term .
Endowment Policy -
- These are shares s in a company that entitle the owner of the shares
to a portion of the companies profits. Any losses are usually
restricted to the face value of the share itself
Ex Gratia Payment -Ex- Gratia payments are some times made by
insurance companies following a loss when the event was not covered by
the policy or perhaps some of the terms and conditions were not
complied with. This type of payment is made solely at the insurers
The first portion
of an insurance loss that the policyholder has to pay out of his own
pocket. Frequently in the case of motor claims, excess payments can be
recovered from the Third Party if it can be proved that they were at
fault for an incident.
This type of policy normally relates to
Liability covers where a higher indemnity limit is required. If your
Public Liability Insurance has a maximum indemnity limit of
£5,000,000 and you require a higher limit but your existing insurer
cannot provide it, it is usually possible to by the extra layer from
another insurance provider..
Excess of Loss Policy -
polices have exclusions and these will be listed in the policy
document. Most policies will have a standard set of exclusions and you
may find that because of your individual circumstances, extra
exclusions are applied to your own policy arrangement is made for a particular employee and to the level of
contribution or target
Export Credit Insurance - An Insurance policy providing cover for
exporters losses arising from non-payment of monies owed.
this term to express how likely they are to suffer a loss.
Insurance policy that allows the manufacturer’s warranty on a
product to be extended for an additional period of time.
Extended Warranty -
Family Income Policy - A type of term insurance policy which
will , on the death of the named person insured, pays out a regular
amount until the end of a specified period.
Fidelity Guarantee –
which provides cover for a business in against Theft by an employee.
- An organisation established by major insurance companies
to settle disagreements between customers and insurance
companies. The FSO oversees the interests of policyholders whose
complaints remain unsolved through the normal company channels of
communication. The service is available to all those holding personal
insurance cover. The decision of the Ombudsman is binding on the
insurer, although the insured may appeal to the court if he so wishes.
When you take out an insurance policy, you should be given a terms of
Business agreement which will outline how you can make a complaint if
you are unhappy.
Financial Ombudsman Service
Financial Services Authority - The Financial Services Authority
(FSA) is an independent non-governmental body, given legal powers by
the Financial Services and Markets Act 2000 to regulate the financial
services industry in the UK.
Financial Services Compensation Scheme - The Financial Services
Compensation Scheme (FSCS) is a safety net for customers of financial
services firms. It pays compensation if an authorised firm is
unable to pay claims against it, usually perhaps
Because it has gone out of business. The Scheme is funded by the
insurance industry and covers deposits, insurance and investments.
Details of the scheme will be provided in terms of business
Insurance policy where the sum insured is accepted to be less than the
value of the property but the insurer undertakes to pay claims up to
the sum insured, without the usual application of an average clause.
First Loss Insurance -
Free-standing AVCs (FSAVCs) -
life assurance term where additional contributions paid voluntarily
into policies similar to personal pensions by employees in
occupational schemes, who wish to top up their pensions, but keep the
money separate from the occupational scheme.
- A friendly society is set up for
the benefit of and is owned by it’s members.
a term that relates to non life insurance contracts such as Home
Insurance or Office Insurance. The policy period on offer is 12 months
and renewal is usually offered at the end of this period.
General Insurance -
issued to policyholders to extend their United Kingdom motor insurance
policy as evidence that they have the minimum insurance cover required
by the law of the country visited. No longer required for European
travel, because minimum legal cover is now automatically included in
Green Card -
insurance term that relates to the provision of a lump sum Death in
Service Benefit for groups of employees.
Group Life -
This is an arrangement made
for the employees of a particular company to participate in a personal
pension scheme on a group basis. This is merely a collecting
arrangement and is not a separate, or occupational, pension scheme
Group Personal Pension -
Holiday Insurance -
type of Insurance ( also known as Travel Insurance can be arranged on
either a short term or an annual basis.
The policy will cover certain perils connected with holidays.
Usually this includes cover for the costs of cancellation, personal
accident, medical treatment abroad and lost or stolen luggage.
is a term which relates to insurance transacted by insurers whose
practice it is to call at the home of the policyholder.
Home Service Business
terms relates to the insuring of domestic dwelling houses and policies
can be extended to included contents and all risks covers. Most
policies require that the home is not used for any business purposes
although some insurer will now include business use for certain
Household Insurance Business -
Insurance Illustration - A
printed example of how much a particular investment may be worth at a
date in the future.
is a list of individuals who have been refused, or charged more for,
life insurance, for various medical reasons.
Impaired Lives Register -
Inception Date - This is the date that an insurance contract
Income draw down - This is a wayof taking regular income
directly from a pension fund instead of buying an annuity
. An annuity can be purchased at a later date.
Income Protection Insurance - A policy which pays will provide
an income for as long as the policyholder is unable to work as a
result of accident or illness. The cover will usually last until
retirement. Sometimes this type of insurance policy is called
Permanent Health Insurance.
Increase in Cost of Working -
This is a form of Business
Interruption Insurance, the policy will provide an indemnity in
respect of additional costs incurred following an insured event under
an insurance policy. The amount is designed to help pay for additional
costs such as renting premises etc.
Increasing Term - A term insurance contract in which the sum
insured increases each year by a fixed percentage of the original sum
This is an Insurance principle by which
policyholders are put in the same financial position after a loss as
they were immediately before it.
Independent Financial Adviser - Also referred to as an IFA,
this is an Adviser authorised to recommend or sell the products of any
insurance or investment firm.
Index-linked - This term usually relates to Home Insurance
products. The sums insured in respect of Buildings & Contents
change automatically in line with an index.
Individual Policy - Insurance taken out by an individual on his
or her own life or by an individual or legal person on the life of
Individual Savings Account (ISA) - This is a savings vehicle
that allows customers to invest in equities, life assurance policies
or save in cash without having to pay tax on the returns gained from
Insurable Interest - A principle of insurance which
states that you may only take out insurance if you would suffer a
financial loss if the event covered by the policy
happens. Individuals have an unlimited insurable interest in
their own life and that of their husband or wife. Insurable Interest
also relates to the insurance of property.
Insurance - in simple terms, insurance is a risk transfer
mechanism; someone (The policyholder) pays someone else (The Insurer
or Underwriter) a sum of money (The premium or consideration) in
return for a policy, which will provide a payment if an event (usually
something unfortunate and unforeseen) happens to the item, which is
the subject of the insurance. Perhaps you worry about your home being
broken in to or being damaged in a flood or your car being involved in
an accident. What would you do if you were suddenly faced with a large
bill to replace or repair your belongings? Insurance can provide you
with peace of mind as well as help remain financially secure.The terms Insurance & Assurance are interchangeable..
Insurance Company - A company that takes on insurance risks by
offering policies in return for the payment of premiums. Insurance
Companies may be ‘mutual’ (owned by the policyholders) or ‘proprietary’
(owned by shareholders).
Insurance Premium Tax (IPT) - A tax imposed on most non-life
At the present moment the standard rate of insurance premium tax is
5%. An exception is Travel Insurance which attracts an Insurance tax
Insured - A person afforded covered by an insurance policy.
Intermediary - A Person or organisation that advises and sells
insurance products on behalf of an insurance company or Lloyds of
London. The Intermediary will usually receive a commission from the
insurer whose products are sold. Commissions vary from product to
product and you may be entitled to know how much an Intermediary is
making by selling a particular product.
Investment - The act of allowing someone else to have use of
your money in return for payment of interest and/or a share in profits
that may be made.
Investment funds - The general name for life funds used for
savings and investment plans.
Income received by a nation from trading in
services rather than goods.
Joint Life - Where a plan covers two or more people.
Payment of the benefits may depend on what happens to just one of
them, or to all of them.
Joint Life Annuity -
An annuity that will pay out to a
partner after the policyholder’s death.
- A document that insurance and investment firms must produce, by law,
that sets out the main features of the plan.
Key Person Insurance - In the event of the death of a key
employee on whom the business depends for its continued profitability,
or even existence, this type of cover provides a sum of money which
can be used to pay for the cost of finding and training a successor,
and to compensate for reduced profitability.
agreement whereby each motor insurer paid for damage to its
policyholder’s car, regardless of which driver was to blame,
providing the policy covered damage to the policyholder’s own car.
No longer in operation.
- The non-renewal of a policy for any reason.
An illness that lies dormant for some years
before manifesting itself.
Latent Disease -
the cost of legal proceedings in circumstances defined in the policy.
Legal Expenses Insurance -
Level Premium -
that stays at the same amount throughout the term of a policy.
responsibility for causing loss to someone else by injuring them or
damaging their property.
Life Assurance Premium Relief
- Tax relief on life insurance
premiums. Applies only to policies taken out before 14 March 1984.
- The length of time a person is
likely to live, taking into account such factors as their present age,
gender, health and occupation.
- The pool of money, maintained by
an insurance company, into which all its life insurance policyholders'
premiums are paid and out of which all claims are paid.
which pay out on death or, in some cases, on earlier maturity of the
policy, eg Endowment, Term, or Whole Life
Life Insurance - Long-term
Linked - Describes any plan
where the value of you insurance, savings or investment goes up or
down in line with the price of units in a fund.
on whose behalf Lloyd’s of London policies are issued. They pledge
all their personal wealth to pay losses. Corporate members were also
introduced in 1994.
Lloyd’s Members -
insurance market organised into syndicates, which underwrites most
types of policy.
Lloyd’s of London -
Loading - An extra premium you are charged because of a
higher risk such as poor health or dangerous job.
A distinct, separate part of the UK insurance
and reinsurance industry centred on the City of London. It comprises
insurance and reinsurance companies, Lloyd’s syndicates, protection
and indemnity clubs (originally created to serve the marine industry),
and brokers who handle most of the business. There is general
agreement that the core of its activity is the conduct of
internationally traded insurance and reinsurance business.
London Market -
Long Term Care Insurance - Pays for some or all of the agreed
costs of long-term care. Intended mainly to cover the costs of elderly
people being looked after either at home or in residential care.
Long-term Insurance -
Life insurances and pension plans, that can last for many years.
Another term for a Claim.
A person, independent of an insurance company
but engaged and paid by it, who checks that a claim is covered and
negotiates with the policyholder the amount payable for a claim.
Loss Adjuster -
who negotiates claims on behalf of policyholders.
Loss Assessor -
- Investment funds, that can also be used for life insurance and
pension plans, where the managers spread the investments across a
range of assets including company shares, government stocks and
The class of insurance
which covers damage to both the hull and cargo of ships or aeroplanes,
along with the liability for property damage, injury and death to
passengers and others. Indemnities are also provided for the goods
that may be lost or damaged whilst in transit.
Marine, Aviation & Transport (MAT) -
Market Value Excess of Investments
- This is the difference
between the market value and the book value of a companies’
Market Value Reduction-
A reduction in the value of a claim on a Unitised With-Profits Policy
in order to reflect fairly the movement of assets underlying the
Material Fact - A fact that would influence an insurer's
decision on whether to issue a policy, and on what terms and
conditions. You must state any material facts when you apply for
An agreed date when a life or pension policy comes to an end, and the
value is paid out.
against the cost of breakdowns of household appliances or motor
Mechanical Breakdown Insurance -
Minimum Income Guarantee (MIG) - This was a means-tested
benefit that helped individuals on low incomes at retirement. It has
now been replaced by the Pension Credit.
cover for a mortgage lender for any loss they might suffer as a result
of a property on which they provided a loan being sold for less than
the amount of the loan.
Mortgage Indemnity Insurance -
type of Creditor insurance that covers the policyholder against
the inability to make repayments due to accident, sickness and/or
Payment Protection Policy -
Mortgage Protection Policy - Life insurance designed to pay off
the outstanding mortgage if you die before the end of the mortgage
policy used both to provide protection for a mortgage loan and as a
savings vehicle to repay the loan at maturity.
Mortgage-Related Policy -
cover the legal liabilities arising from the use of a motor vehicle.
Private car, motorcycle, commercial vehicles and fleets are all
included within this category. Comprehensive policies also
cover damage to the vehicle.
record of claims for stolen or written-off vehicles. Used by insurers
to detect multiple, and therefore fraudulent, claims.
Insurance Anti-Fraud and Theft Register -
Mutual - An insurance company which is owned by its
with a national presence, whose clients are often corporate bodies and
have departments specialising in different sectors of the market.
National Brokers -
most common form of tort. In Blyth v Birmingham Waterworks Co. (1856)
it was defined as 'the omission to do something which a reasonable man
guided by those considerations which ordinarily regulate the conduct
of human affairs would do, or doing something which a prudent and
reasonable man would not do'. Gives rise to civil liability.
The excess of
an insurer’s assets over its liabilities.
Net Assets -
A premium net
of reinsurance ceded but gross of commission, and excluding premium
Net Premium -
used to determine the maximum contributions to a Retirement Annuity
or Personal Pension.
Net Relevant Earnings
New-For-Old - Cover
for property where an item lost or destroyed would be replaced with a
brand new one, with no deduction for wear and tear. Also called Replacement-as-New.
reduction in a renewal premium to reflect a claim-free record; used
most often in motor insurance.
No Claim Discount (or Bonus) -
policy covering a limited number of types of loss or damage. The term
is mainly used in motor insurance, where a vehicle may have RTA cover
– the minimum cover provided by the Road Traffic Act; third party
cover, which indemnifies the policyholder for damage caused to other
people’s property and injury that may be caused to others; or third
party, fire and/or theft cover which additionally provides
compensation to the policyholder if the insured vehicle is destroyed
or damaged by fire and/or theft.
Non-comprehensive Cover -
Non-Disclosure - Where you or anyone acting for you, fails to
state a material fact when applying for insurance.
insurance policies that are non-linked receive their investment income
in the form of "bonuses", paid out of the total income
earned by the insurance company on its pooled fund, and are also known
as "with-profits". The value of the saver’s fund thus
depends on the amount he/she has bought and the amount of bonuses
added. Once added, bonuses cannot be taken away, making these policies
generally less volatile than linked policies.
relates to the whole of a certain class of business and is a way of
limiting the loss made by the ceding office.
Non-proportional Treaty Reinsurance -
who is not contracted out of the State Earnings-Related Pension
Not Contracted-out -
scheme set up by employers for the benefit of their employees.
Contributions will be paid by the employer, and often by employees,
and employers may delegate responsibility for the running of their
pension scheme to an insurance company. See also Defined Benefit
Schemes and Defined Contribution Schemes.
Occupational Pension Scheme -
cover is provided for a period of time agreed in the policy, in the
case of general insurance, usually one year. Where all claims arising
from a policy are quickly identified and dealt with, the insurer can
close the books on that policy soon after the period of cover has
ended and calculate the underwriting profit or loss made. This
business can then be accounted for on a one-year basis. Where claims
are not identified and dealt with so quickly, as is typical for
marine, aviation and transport (MAT) and reinsurance, the business may
be accounted for on a two or three year basis.
One/Three Year Account -
- A type of Collective Investment, similar to a Unit Trust.
Open-Ended Investment Company (OEIC)
An option to move the value of your pension fund at retirement to
another company or pension provider - usually to purchase a higher
amount of pension income known as an Annuity.
Open Market Option
Figures showing ratios of claims, expenses
and underwriting in relation to premium income.
Operating Ratios -
Life insurance and pensions business where
the premiums are usually paid through the banking system by cheque,
standing order or direct debit.
Ordinary Branch -
Company agents, other than company
staff, as defined in the ABI code for general insurance, whether they
sell the products of one company, or up to six companies.
'Other' Company Agents -
For the purpose of data in this
report, any ‘non-IBRC registered’ independent intermediary as
defined in the ABI Code for General Insurance.
'Other' Independent Agents -
insurance products of seven or more insurers for a particular class of
Other Intermediaries & Brokers -
The total expenditure of an insurer in relation to any
class of insurance business, comprising the cost of claims and the
insurer’s business expenses, including any commission paid to sales
staff, Brokers or Intermediaries, together with amounts
set aside for Reserves.
Pension policy that receives both a
premium from the policyholder and a DSS rebate.
Partially Contracted-out -
of business loss relates to financial losses that may have occurred,
eg Consequential Loss and Mortgage Indemnity policies.
Pecuniary Loss -
Pension - The regular income you get after you retire.
Pension Annuity -
annuity which become payable on the maturity of a pension policy. A
pension annuity converts a pension fund into pension income ie the
income to be paid until death. You buy an annuity with your pension
fund from an insurance company.
Permanent Health Insurance -
Persistency - The rate at which policyholders keep their
policies with a life insurer.
policy that pays specified amounts of money if the policyholder is
injured in an accident. Depending on the type of disability, the
payments may be made weekly, for a set period, or as a lump sum.
Personal Accident Insurance -
arrangement that allows a policyholder to pay money into a plan
managed by a fund manager who then invests the money in equities on
behalf of the policyholder.
Personal Equity Plan (PEP) -
Personal Lines - Any policy taken out by an individual in
his/her private capacity.
plan, with tax advantages, that builds up a fund to give you a regular
income when you retire. You can pay in regular amounts, one-off
occasional amounts, or both.
Pluvius Insurance - Covers against losses arising as a result
of bad weather.
document giving full details of the contract between the insurer
and the policyholder.
Policyholder - Person or organisation to whom the insurer
issues the policy. Normally the person to whom benefits are payable.
Premium - The amount paid by the policyholder for insurance.
policy that covers the cost of private medical treatment.
Private Medical Insurance -
businesses against liability claims resulting from defects in the
products they sell.
Product Liability Policy -
protection to businesses against errors cause in their professional
capacity eg solicitors who incorrectly advise clients.
Professional Indemnity -
financial statement bringing together the Revenue Account
profit and loss for each class of business, together with investment
income and taxation, and shows the company profits to be distributed.
Profit & Loss Account -
policies cover specified property that may be damaged or destroyed by
events or perils such as fire, storm or theft.
Property Damage -
in which the reinsured and the reinsurer participate in premiums and
losses in a fixed proportion. It can apply to both facultative and
Proportional Treaty Reinsurance -
Proposal Form - An application for insurance cover.
Proposer - Person or company who applies to take out insurance.
that are owned by shareholders.
Proprietary Companies -
Freedom of Services.
Provision of Services -
insurance of liability for accidental bodily injury or damage to the
property of third parties.
Public Liability -
life annuity which commences immediately on, or shortly after,
purchase. Also know as an Immediate Annuity.
Purchased Life Annuity -
A statement by an insurer of the premium he will
require for a particular insurance
The price of insurance, usually expressed as the cost of
a unit of cover, eg £x per £1,000.
Rebate Only - Personal pension policy where the only premium
received is the Inland Revenue rebate paid for contracting out of
additional State pension. Also called Fully Contracted Out.
recurring premium paid over the term of the policy, at intervals
specified in the policy, usually monthly.
Regular Premium -
good. Where insured property is damaged, it is usual for settlement to
be effected through the payment of a sum of money, but a policy may
give either the insured or insurer the option to restore or rebuild
is the cover insurance companies can purchase to protect themselves
against large losses or an unexpected aggregation of losses.
under which additional premiums can be paid later to provide increased
benefits; these are at the policyholder’s discretion and are
Renewable Single Premium Policy -
Renewable Term - A term insurance policy which gives the
policyholder the option to take out a further term policy without
the need for any further evidence of health.
Renewal Notice - Notice sent to the policyholder inviting
him/her to renew a policy for a further period and stating the premium
Money put aside
by insurers to meet known or possible future liabilities. They can
broadly be divided into Technical Reserves and Free Reserves.
financial statement containing the underwriting results. It usually
shows premiums, claims incurred, commission, expenses and the transfer
to/from the Profit & Loss Account.
Revenue Account -
Reversionary (or Regular) Bonus - Bonus for with-profits
policies, usually added at yearly intervals, during the term of the
identification, measurement and economic control of risks that
threaten the assets and earnings of a business or other enterprise.
Risk Management -
A recovery of all or part of the value of an insured
item on which a claim has been paid. The insurer will normally dispose
of the item and apply the proceeds to reduce the cost of the claim.
Savings Policy - Plan where you make regular payments to build
up a lump sum.
Schedule - The part of a policy containing information peculiar
to that particular risk. The greater part of a policy is likely to be
identical for all risks within a class of business covered by the same
style’ personal pension that was available only to the self-employed
prior to the introduction of Personal Pensions in 1988.
Section 226 Policy -
which do not belong to the insurer and which are excluded from the
investment funds. The assets are managed on behalf of the client and
normally belong to the trustees of a pension fund.
Segregated Funds -
- Part of an
employee's National Insurance contributions goes into SERPS (State
Earnings-Related Pension Scheme), which is paid on top of the Basic
State Pension on retirement. The SERPS pension, payable when you reach
State pension age, depends on you earnings while you were in
employment and the National Insurance contributions paid. SERPS is
paid in addition to the Basic State Pension. This was replaced by the State
Second Pension in April 2002.
written under Freedom of Services.
Services Business -
Single Life Annuity - Annuity based on the life of just one
Single Premium Policy - A Long-term Insurance policy
where the premium is paid in a single lump sum.
excess determined in accordance with the insurance supervisory rules
of the insurer’s assets over its liabilities. Under those rules,
this is required to be not less than a prescribed minimum.
Solvency Margin -
of the net assets of a non-life insurer to its annual net written
Solvency Ratio -
where each premium paid is identifiable to an individual employee and
where, in addition, the rules allow the employer discretion both as to
whether the pension arrangement was made for that employee and to the
level of contribution or target benefit under the policy.
Sponsored Individual Scheme -
- A type of personal pension introduced by the Government in 2001 in
order to make it easier for people to save for their retirement.
Stakeholder pensions are designed to be simple, cheap and flexible.
Critical Illness. These are policies where critical illness
cover is the primary element of the policy as opposed to being a Rider
Stand-alone Critical Illness -
State Second Pension (S2P)
- Extra state pension that replaced SERPS in 2002. It is linked to
your earnings while you were employed, but only up to a limit that can
change from time to time.
most important source of law is statute law, otherwise known as Acts
of Parliament, which may create entirely new law, over-rule, modify,
or extend existing principles of common law and equity, and repeal or
modify existing Statute law.
Statute Law -
used by an insurer to signify provisional acceptance of an insurance
pending inspection by a surveyor whose report is necessary to
determine the rate and conditions applicable.
Subject to Survey -
The right of
an insurer who has indemnified a policyholder to take over any legal
rights the policyholder may have had in respect of that particular
enrolled in a scheme where a subscription is paid for himself/herself
alone or including dependants. For personal business it should relate
to the policyholder, and for corporate business, the subscriber is the
member, ie the employee within a group scheme.
arising from subsidence, heave and landslip.
Subsidence Claim -
for which property is insured, and the maximum amount that the
insurance company will pay for any claim. In life insurance, the
amount that is guaranteed to be paid and to which bonuses may be
Sum Insured -
to pay the direct loss and damage suffered as a result of a breach of
Surety Bond -
Surrender Value - What you get back if you cash in a life
policy before it matures. Not all life policies have a surrender
underwriters at Lloyd’s.
Technical Reserves - Money
put aside to meet specific items, usually for events that have already
happened. The four main types of technical reserves are for unearned
premiums, unexpired risks, unreported claims and outstanding claims.
Temporary Insurance -
provided for a specified number of years. The insurer only pays out if
the policyholder dies within this time.
Term Insurance -
Terminal (or Final) Bonus - Extra bonus that may be paid for
with-profits policies at maturity or if a claim is made.
Term Assurance - Life cover provided for a specified number of
years. The insurer only pays out if the policyholder dies within this
from burglary, robbery and theft under the Theft Act 1968 in England
and Wales, and burglary, robbery, housebreaking and larceny in
Scotland and Northern Ireland.
Theft Claim -
involved in a claim who is neither the policyholder nor the insurer.
Third Party -
Third Party Administrator - An organisation to which an
insurance company contracts out administration.
Tied agent -
A sales person who sells the policies of only one insurance company.
Some sales people are tied to several companies - this is known as a
Total Loss -
overall profit/loss calculated as the Underwriting Result plus Investment
Trading Result -
of the transfer payment which the trustees of a pension scheme allow
members to take with them to another scheme or personal pension.
Transfer Value -
A policy that
covers a combination of loss of baggage, medical expenses, legal fees,
and change in travel arrangements.
agreement between offices whereby the ceding company is bound to cede
and the reinsurer bound to accept a share of all risks defined in the
Treaty Reinsurance -
Trust - An arrangement whereby control over an Asset is
transferred to a person or organization (known as the
"trustee") for the benefit of someone else (known as
Trustee- A person appointed
to manage and safeguard the assets of a trust.
sum insured is not enough to cover the maximum possible loss or
Underwriter - Person who decides whether to accept a risk and
calculates the premium to be charged.
Underwriting Ratio -
profit or loss achieved by an insurer on insurance underwriting
activity, calculated as premium income less the cost of claims and the
insurer’s expenses in connection with that business (ie
"outgo"). It has been common for insurers to make
underwriting losses since they also receive investment income which
generally offsets the underwriting loss.
Underwriting Result -
Uninsurable Risk -
risk where loss is either inevitable (eg a house already on fire or a
person suffering from a terminal illness) or gradual (eg rust and
A trust into
which a small investor may buy by acquiring units. The capital
collected is invested in various securities in a wide range of
Unit Trust -
Unitised With-Profit - Contracts where premiums are invested in
units, either in the with-profits fund or in linked funds or in a mix
Unit-Linked - See Linked.
Unit trust -
Investment fund that pools the payments of many individual investors.
The fund is split into units of equal value. The unit prices move up
and down in line with the value of the fund's investments.
which sell insurance policies to their customers but it is not their
primary product or service. These policies are underwritten by
Utilities / Retailers / Affinity Groups -
Utmost Good Faith - The principle of insurance which requires
proposers to give all relevant information to the insurer and requires
insurers to deal openly and honestly with policyholders.
optional extra on a life, protection or pension policy which
means that the insurance company will pay the premiums if the
policyholder is unable to because of illness or injury.
Waiver of Premium
Warranty Insurance - This type of insurance provides cover
against the cost of repairs to broken down household appliances.
This is the
amount deducted from claims payments to allow for any depreciation in
the property insured that is caused by its usage.
Wear and Tear -
from burst pipes, storm and weather damage.
Weather Claim -
Whole Life Policy - A policy where premiums are paid for the
rest of an individual's life, or up to a specified advanced age, and
benefit is paid on the death of the person insured, whenever that
insurance policies that receive their investment income in the form of
"bonuses", paid out of the total income earned by the
insurance company on its pooled fund. The value of the saver’s fund
thus depends on the amount he/she has bought and the amount of bonuses
added. Once added, bonuses cannot be taken away, making these policies
generally less volatile than linked policies.
With Profit Insurance -
With-Profit Bonds - A fund made up of investments like company
shares, fixed interest securities, commercial property and money.
Policies can be single premium (with-profits bonds) or bought with
regular premiums to save for pensions or general savings. With-profits
policies usually have regular bonuses added and the eventual payout is
usually smoothed to reduce the peaks and troughs of investment
vehicle which is not repairable, or one which would cost more to
repair than the car was worth before the damage occurred. Also known
as a Total Loss.
income due to the insurer on the risks accepted during the year.
Written Premium -