The giving up by an insured to the insurer of damaged property when a total loss is claimed
An absolute and unqualified agreement to the terms of an offer, so creating a contract
An unforeseen and unintended event or occurrence
Normally unacceptable business taken by an insurer as a goodwill gesture in the hope that further business will materialise
An event or damage that is the result of natural causes, without the intervention of human beings, such as flood, lightning and earthquake. Contrary to what some insurer staff may say when claims arise; acts of God are definitely insurable and are included in the Insured Events in material damage policies.
A person who acts on behalf of another and in the case of insurance is the intermediary between the proposer and the insurer
The sum to be paid in the event of a total loss under a valued policy. For example, the value of a specified item on an All-Risks schedule. Vintage motorcars on a motor policy may have an agreed value, because it is not easy to establish a “market value”.
An All-Risks policy covers the insured against all risks of loss or damage to the property insured, other than loss or damage specifically excluded.
A means of settling disputes legally without going to court where the issue concerns the amount of a claim and not liability. A qualified person or persons whose appointment has been agreed to by the parties involved, will hear the case and give a decision
A property or financial commodity, which can, if necessary, be converted into cash.
Attestation
In general insurance, this is a policy provision that has the effect of reducing a claim payment where underinsurance is discovered. It is a provision of a policy that reduces a claim when the sum insured is less than the actual value or replacement value of the property insured. The insured is considered to be his own insurer for the difference. For example, a house is insured for R100 000, but the real replacement value is R200 000. If it suffers storm damage of R15 000, the insured will be paid only R7 500, because the sum insured is only 50% of true replacement value. Average does not apply to agreed value policies or usually to “first loss” policies, such as theft.
The terms used in South Africa for the form of motor insurance that covers the insured’s liability for:
• injury to passengers not covered in terms of the Road Accident Fund Act No. 56 of 1996, as amended; and
• damage to the property of third parties caused by the vehicle.
The value of the improvement in an insured property when it has been repaired or rebuilt following loss or damage
A policy covering several items under one (1) sum insured
The sheets of information prepared by an insurer detailing cessions under reinsurance treaties
A professional full-time independent agent or intermediary
The commission or fee paid to the brokers by the insurers for placing business with them
A form of excess of loss insurance that protects the insurer against losses arising from major catastrophes
That part of an insurance transferred to a reinsurer, the transfer of rights, title and interest under a contract
The probability or likelihood that an event will occur
A formal application made by the insured for payment after the occurrence of loss or damage covered by the policy
A form supplied by an insurer to enable an insurer to obtain the required information from the insured in order to lodge a claim in terms of the policy
The term used in motor insurance to indicate into which of the rating groups a policyholder will fall, according to his or her claims record
The division of a risk between two (2) or more insurers, where each is individually liable to the insured for their proportion of claims
An insurer who shares with others in co-insurance
Policy issued by the leading insurer on behalf of all the insurers who share a risk by way of coinsurance
The remuneration made to intermediaries by insurers for placing business with them
The part of the country’s legislation built up from customs and usages that have been recognised by its courts and thereby given the force of law
An insurer undertaking both life and non-life business
A policy covering a wide variety of perils; part of a contract that must be complied with by one party or another Conditions Provisions in the insurance contract that state the rights and duties of the insured and of the insurer
A loss directly arising from another loss
The payment or promise of payment for goods or services, this being the premium in the case of insurance
An unforeseen occurrence Contingency Fund Monies put aside by a company in order to pay for unexpected losses
An agreement made by two or more parties with the intention of creating a legal obligation between them.
An agreement between insurer and insured whereby, in return for the payment of a premium, the insurer undertakes to indemnify or compensate the insured upon the happening of a specified event
The principle whereby two or more insurers covering the same risk contribute proportionately to any losses
The protection provided by insurance
Temporary evidence of the granting of insurance
An amount of money claimed by or awarded to a third party as compensation for injury or loss
The statement on a proposal form signed by the proposer certifying the truthfulness and accuracy of the information supplied
An American term, similar in meaning to excess and being the first portion of a loss payable by the insured
The authority given to an agent of an insurer to act on his or her behalf in accepting risks within agreed guidelines
An advance payment made by the insured before the actual premium has been decided. For example, if a renewal premium is still being negotiated with insurers at the time renewal date arrives, the client may be asked to pay a deposit premium based on an estimate. When the renewal premium is agreed, or at an agreed time, either the balance is collected or the client is refunded if he has overpaid.
The extent to which (insured) property has diminished in value due to factors such as wear and tear.
An original insurance contract between insurer and insured without the use of an intermediary
An insurer in contact with insuring members of the public or corporations. In South Africa a direct insurer is one that deals with the insured and does not accept business from intermediaries.
Physical or mental condition that prevents a person from undertaking “normal” duties of a job or the ordinary activities of life. For insurance purposes, the word “disability” will have a special and particular meaning, which will be defined in the policy concerned.
The duty of the parties to a contract of insurance to reveal all material facts to each other before it is concluded and prior to each renewal
The amount or percentage of premium that we will deduct from a client’s premium because he has improved his risk, for example, by installing an armed response alarm in his house
That part of a premium relating to a completed or expired period of risk; the actual premium chargeable under an adjustable policy
Documentary evidence of some alteration to a policy of insurance Escalator Clause The clause in a policy that allows the sum insured on the property to rise throughout the period of insurance in step with the assumed rate of inflation
A payment made to an insured as a gesture of goodwill where there is no liability under the policy
A peril specifically excluded from the insurance
That part of a loss for which the insured is liable. It is a fixed amount of money or a percentage of the claim, which the insured agrees to contribute towards the cost of a claim under an insurance policy. It can be voluntary, carried by the insured in return for a premium discount, or compulsory – applied by the insurer as an underwriting measure.
A form of insurance where the reinsurer agrees to pay the balance of any losses exceeding a stated monetary amount in the primary, or underlying, policy
A contractual provision in an insurance policy that denies or restricts coverage for certain perils, persons, property or locations
The person named in a Will who has agreed to carry out its terms
That part of the premium that meets the policyholder’s share of the insurer’s administrative costs
The accidental or fortuitous ignition of something that should not be on fire
The first uninsured amount of a loss carried by a claimant. It is the same as “deductible” above.
An insurance policy where the insurer pays all losses up to a given limit
A motor policy covering a group of vehicles with the premiums calculated on an experience basis
The amount of a loss at or below which no claim is payable by the insurer. Above that amount, the loss will be met in full.
How often a loss event occurs. There is a relationship between the frequency of losses and the severity of losses. Small losses, such as losing pens, spectacles, etc., happen frequently, while severe losses, such as caused by floods and earthquakes, occur much less frequently.
The common pool into which premiums for each class of insurance are paid, and from which losses
are met
Insurance that is not long-term business
A physical or moral feature that affects the likelihood of a loss occurring or has an influence on the size of the loss Incurred but not Reported
Claims that have occurred, but are not yet reported to the insurers. Many governments require that insurers establish reserves to cover such losses
The placing of the insured in the same financial position after a loss as he or she was in immediately prior to the occurrence
A method of adjusting sums insured to provide for inflationary increases in values
An official of an insurance company whose duties involve the selling and servicing of its policies, either directly to the public, or through intermediaries
The principle that requires a person effecting insurance to have a legally recognised relationship to the subject matter of the insurance
A risk transfer agreement whereby the responsibility for meeting losses passes from one party (the insured) to another (the insurer) on payment of a premium
A document that is evidence of a contract of insurance
A person or organisation purchasing insurance. A person or organisation in whose name the policy is issued. The person whose interests are insured by the policy Insurer A company or society that is legally licensed to transact insurance business. The party to the insurance contract who carries the risk and who promises to pay compensation indemnity – losses or benefits, usually an insurance company
A person who arranges insurance on behalf of another
The termination of an insurance contract through the non-payment of the premium, or by the insurer’s decision not to invite renewal
The rules enacted or customary in a country ordering or prohibiting certain actions
The insurer who accepts a major share of risk on a reinsurance agreement, often the one who first signs a broker’s slip
A letter from an insurer to a proposer indicating that his application for cover has been accepted
A claim upon one’s assets by another person. Legal responsibility to make good another person’s loss or damage Liability Insurance Coverage for a policyholder’s legal liability resulting from injuries to other persons or damage to their property
The maximum amount that an insurer will pay for one loss in terms of a liability policy, for example, if the limit of indemnity under a Public Liability policy is R1.000.000, insurers will not pay more than this amount.
A share of an insurance that is divided among two or more insurers
The corporation that organises the market of individual underwriters in London (but accepts business introduced by brokers from all parts of the world) and provides a full range of ancillary services
Those elements added to a premium to allow for insurer’s expenses. The premium that an insured is charged over and above the “standard” or “average” rate for their insurance
An independent, qualified person who assesses the size or value of a loss on behalf of an insurer, but who may also be employed by an insured to look after his interests in a loss settlement. The loss adjuster may also gather and report on the facts surrounding the loss to enable insurers to decide on the validity of the claim in terms of the policy wording
The loss history of a prospect or client over a given period, for example, three years. This is not the same as a claims experience, because if a prospect has not had previous insurance, he would not have a claims experience, but he may have had many (uninsured) losses.
Activities undertaken to prevent losses from occurring Loss Ratio The ratio of claims to premiums paid
The price at which an investment or asset can be sold or bought at any specific time
Anything that would affect the judgment of a prudent underwriter in accepting, declining or deciding terms for a risk
A false description of a material fact
A false statement of a material fact that can be innocent or fraudulent, a lie
A loan made for the purpose of purchasing, adding to or improving property
An insurance company owned by its policyholders; i.e. it has no shareholders
Failing to act in what the law considers to be a reasonable, responsible manner as a result of which damage to property or injury to persons may occur
The insurer’s own share of claim payments after deduction of the amount payable by the reinsurers
Insurance where the replacement value of the property that has been lost or damaged is payable without deduction for depreciation, for example, paying a householders contents claim on a “new, replacement cost” basis
An independent official to whom grievances can be aired, free of charge. The insurance Ombudsman aims to increase confidence in insurance by offering an independent resource for resolving disputes between insurance companies and their customers. His costs are paid by the insurance industry.
The communication of the proposed terms of a contract by one party to another
The clause in a policy that sets out the circumstances in which the insurers will make claim payments
The funds put aside by insurers to cover claims that have been incurred, but not yet paid
Claims not yet paid, where estimated figures are used in the insurer’s accounts
A policy into which several different types of insurance have been combined
A disability that is less that total (according to the particular definition relating to the contract in question), but still sufficient to hamper the individual in his or her occupation
A contingency or fortuitous happening that could cause losses
Disability from which the individual is unlikely to recover, for example, in the case of a lost limb.
Written evidence of the terms of an insurance contract. It is the legal document issued by the insurance company to the policyholder that states the terms and conditions of the insurance; it may also be called the policy contract or evidence of the contract between the insurer and the insured
The insured person or organisation in whose name the policy is issued
The clause in a policy that sets out the essential elements of the contract
Any physical or mental condition that existed prior to the effective date of insurance coverage
The money paid by the insured to the insurer for cover as provided in the policy
The price per unit of insurance
A person instructing an agent to act on his behalf
The premium based on the length of time for which the insurer was actually on risk. A rate charged for a period of insurance cover shorter than the normal period
The chance of an event occurring
A reinsurance company not transacting any direct insurance business
Reinsurance where reinsurers take a given proportion of the direct insurer’s premiums and losses
An application for insurance that seeks to obtain from the proposer all the information relating to the risk
The individual or organisation seeking insurance
A company owned by its shareholders
A policy condition whose observance is essential for the enforcement of the contract
The direct cause of a loss uninterrupted by any other event
Proportional reinsurance where the reinsurer accepts a fixed percentage of every risk written by the ceding company
The sum charged per unit of exposure by which the premium is calculated
The term applied to insurance, where the premium is higher than usual
The making good of damaged property; the restoration of the sum insured after settlement of a loss on payment of an additional premium
The restoration of the sum insured after it has been reduced through the payment of a claim
The practice whereby one insurer transfers part or all of the risk it has accepted to another insurer (the reinsurer)
An insurer who effects and is entitled to be indemnified under a contract of reinsurance
An insurer or reinsurance company that accepts contracts of reinsurance
The process for continuing an insurance contract for a further period after the first or current period of cover has ended
The notice issued by a short-term insurer to remind a policyholder that his or her contract will shortly terminate
The value of property as indicated by the current purchase price of a similar article
A written or spoken statement made during contract negotiations
The maximum liability that an insurer wishes to keep for his own account in respect of a particular risk
A situation that cannot be controlled or perfectly foreseen the subject matter of an insurance contract
The business discipline applied by large commercial and industrial organisations to manage those risks that can cause losses
Whatever is recovered of an insured item, or part thereof, on which a claim has been made. Insurers will sell any salvage, which has value in order to reduce their loss.
A document forming part of the policy, indicating the list of personal details of the insured, the sum insured, premium, period of insurance and the subject matter of the insurance in a policy
Insurance that a business organisation finances internally, often by establishing a fund to meet losses. It involves a conscious decision to retain a risk for their own account.
The rate of premium applied to insurances in force for periods of less than twelve months and which is higher proportionately than the annual rate
Insurance that operates on a year-to-year basis, or a shorter period, and which may be terminated by the insurer or the insured
A form submitted by a broker to underwriters containing particulars of the risk proposed for insurance. Underwriters indicate on this slip what percentage of the risk they will accept and on what terms.
The minimum size of the shareholders’ funds required by the supervisory authorities
Extra risks added to a policy to give cover not provided in terms of the basic wording; the term usually applies to storm, water, wind and impact damage added to a fire policy.
The form on which details of large risks are set out and appended to the policy.
Laws promulgated by the government of a country
A form of reinsurance used as a means of limiting aggregate net losses on a particular class of business in any one year of account
The right of one party to stand in a place of another and take up the latter’s legal rights against a third party. The process of recovering the amount of claims damages paid out to a policyholder from the legally liable party
The monetary limit of the insurer’s liability on an insured item under a policy
That part of the sum insured that the insurer does not retain and consequently reinsures
A risk that is particularly attractive to thieves, such as a shop, which sells computer equipment, jewellery or other valuables that are easily disposable by the thieves
A person who is not a party to a contract
Motor insurance cover providing compensation for injury to third parties and damage to their property
Third-party insurance, plus cover for fire damage to, and the theft of, the insured’s own vehicle
Complete inability to undertake either one’s usual occupational duties. In an insurance policy providing cover against this contingency, the definition applying to that contract is normally spelled out in detail. The exact definition may vary considerably between policies.
Damage or destruction to real or personal property to such extent that it cannot be rebuilt or repaired to its condition prior to the loss or when it would be cost prohibitive to repair or rebuild in comparison to the value of the property prior to the loss
A contract between an insurer and a reinsuring company under which the former agrees to give and the reinsurer agrees to accept reinsurance for risks falling within the terms of the agreement
The duty of good faith imposed on both parties to an insurance contract to disclose all material facts and to behave in an honest manner Underinsurance Insurance for a sum insured less than the value at risk
An insurer; a person who makes decisions on whether or not to accept insurance business and, if accepted, on what terms
The process of assessing a proposal for insurance to decide on its acceptability, and if so, on what terms and conditions
These may also be called “acceptance criteria” and refer to the rules governing acceptance, or renewal, of business. For example, underwriting criteria refer to the need for physical protections at the proposer’s home or antitheft devices installed in his car.
A list of property with professional valuations allocated to each item as the basis of insurance
A contract in which the insurers agree to pay the sum stated in the event of total loss, without the usual allowance for depreciation or appreciation
A contract that cannot be enforced by either party
A contract that one party can choose not to enforce
A condition that must literally be complied with and, if not complied with, non- compliance can void the insurance
