Commercial insurance terminology
This Jargon Buster will help you to understand the terms used every day by those working in the commercial insurance industry.
Click on a letter below to see a list of terms beginning with your chosen letter.
A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics.
A further premium payable by the insured as a result of policy amendment, that may have increased the risk or changed the policy conditions or sum insured.
One who investigates and assesses claims on behalf of insurers.
The maximum amount an insurer will pay under a policy in respect of all accumulated claims arising within a specified period of insurance.
Term used to describe insurance against loss of or damage to property arising from any fortuitous cause except those that are specifically excluded.
A clause in insurance policies whereby, in the event of under-insurance, the claim paid out by the insurer is restricted to the same proportion of the loss as the sum insured under the policy bears to the total value of the insured item.
Insurance for business firms, or non-profit organisations to protect against losses through unforeseen circumstances in return for the payment of a premium.
Termination of a policy before it is due to expire. There may be a cancellation clause in a policy setting out the condition under which the policy may be cancelled by notice. In most cases this will result in a return premium being paid by the insurer to the insured.
Injury or loss to the insured arising so as to cause liability to the insurer under a policy it has issued.
A number of different commercial insurances put together as a single package.
Insurance for business firms or non-profit organisations to protect against losses through unforeseen circumstances in return for the payment of a premium.
Insurance of loss following direct damage e.g. loss of profits; loss of use insurance.
Insurance by employers in respect of their liability to employees for injury or disease arising out of and in the course of their employment. With some exemptions this insurance is compulsory in Great Britain, and can only be provided by an authorised insurer.
Documentary evidence of a change in the wording of or cover offered by an existing policy.
The first portion of a loss or claim which is borne by the insured. An excess can be either voluntary to obtain premium benefit or imposed for underwriting reasons.
A provision in a policy that excludes the insurer’s liability in certain circumstances or for specified types of loss.
A bureau established by major insurance companies to oversee the interests of policyholders whose complaints remain unsolved through normal company channels of communication. The service is available to all those holding personal cover with the insurers who have joined the scheme. The decision of the Ombudsman is binding on the insurer, although the insured may appeal to the court if he so wishes.
Insurance 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 application of average.
A term normally applied to gross written premiums before deduction of brokerage and discounts.
A physical or moral feature that introduces or increases the risk.
The date from which, under the terms of a policy, an insurer is deemed to be at risk.
Under a business interruption policy some cover is provided for additional expenditure incurred by the insured solely for the purpose of reducing the shortage in production following an insured event.
A principle whereby the insurer seeks to place the insured in the same position after a loss as he occupied immediately before the loss (as far as possible).
Under a business interruption insurance the period during which cover is proved for disruption to the business following the occurrence of an insured peril.
An optional property coverage endorsement offered by some insurers that increases the policy’s limits of insurance during the policy term to keep pace with inflation. Commonly called Day One Uplift.
For a contract of insurance to be valid the policyholder must have an interest in the insured item that is recognised at law whereby he benefits from its safety, wellbeing or freedom from liability and would be prejudiced by its damage or the existence of liability. This is called the insurable interest and must exist at the time the policy is taken out and at the time of the loss.
The value of the insurable interest which the insured has in the insured occurrence or event. It is the amount to be paid out by the insurer (assuming full insurance) in the event of total loss or destruction of the item insured.
An insurance intermediary who advises his clients and arranges their insurances. Although he acts as the agent of his client, he is normally remunerated by a commission from the insurer. An insurance broker is a full-time specialist with professional skills in handling insurance business. Since January 2005 intermediaries and brokers must be registered with, and regulated by the Financial Conduct Authority.
The Finance Act 1994 introduced this new tax on most general insurance risks located in the UK. Currently @ 6% but will increase to 9.5% with effect from November 2015.
The person whose property is insured or in whose favour the policy is issued.
An insurance company or Lloyd’s underwriter who, in return for a premium, agrees to offer a policy covering any loss or damage suffered by the person paying the premium as a result of accident or occurrence.
The non-renewal of a policy for any reason. LIMIT?The insurer’s maximum liability under an insurance, which may be expressed ‘per accident’, ‘per event’, ‘per occurrence’, ‘per annum’, etc.
A Society, incorporated under Act of Parliament of 1871 and known as the Corporation of Lloyd’s, which provides the premises a wide variety of services, administrative staff and other facilities to enable the Lloyds market to carry on insurance business efficiently.
A broker approved by the Council of Lloyd’s and thereby entitled to enter the underwriting room at Lloyd’s and place business direct with underwriters. Lloyd’s brokers must meet the Council of Lloyd’s stringent requirements as to integrity and financial stability.
Independent qualified loss adjusters are used by Insurers for their experience and expertise necessary to carry out detailed and in some instances prolonged investigations of complex and large losses. Although the adjuster’s fees are invariably paid by the insurers he is an impartial professional person and makes his judgement on the amount to be paid in settlement solely on the basis of established market practice. It is his task to negotiate a settlement which is within the terms of the policy and equitable to both insured and insurer. Should he himself not be an expert in a particular discipline which is necessary or desirable to pursue his negotiations, he will consult or employ such an expert.
In motor insurance, an engineer. In other classes a person who, in return for a fee (usually a percentage of the amount claimed), acts for the claimant in negotiating the claim.
The ratio of incurred losses and loss-adjustment expenses to net premiums earned. This ratio measures the company’s underlying profitability, or loss experience, on its total book of business.
A warranty in a business interruption insurance policy stipulating that for the interruption insurance to become effective there must be a policy in force in respect of the material damage and a claim paid or admitted thereunder for such damage caused by an insured peril.
Any fact which would influence the insurer in accepting or declining a risk or in fixing the premium or terms and conditions of the contract is material and must be disclosed by a proposer, or by the insurer to the insured.
Term variously used to mean gross premiums net of commission, brokerage, taxes, or any combination of these.
Where insurers agree to pay the cost of property lost or destroyed without deduction for depreciation.
A rebate of premium given to an insured person by an insurer where no claims have been made by that insured.
The failure by the insured or his broker to disclose a material fact or circumstance to the underwriter that my give rise to acceptance of the risk.
A contingency, of fortuitous happening, which may be covered or excluded by a policy of insurance.
The period during which the insurer can incur liability under the terms of the policy.
Insurance for fixed benefits in the event of death or loss of limbs or sight by accident and/or disablement by accident or sickness. Accident and sickness may be insured together or separately.
A document detailing the terms and conditions applicable to an insurance contract and constituting legal evidence of the agreement to insure. It is issued by an insurer or his representative for the first period of risk. On renewal a new policy may well not be issued although the same conditions would apply, and the current wording would be evidence by the renewal receipt.
These policies cover the insured’s legal liability for bodily injury to persons, or loss of or damage to property caused by defects in goods sold, supplied, erected, installed, repaired, treated, manufactured, or tested by the insured.
This policy protects against legal liability towards third parties for injury, loss, or damage, arising from its own professional negligence or that of his employees.
A form sent by an insurer to a person requiring insurance so as to obtain sufficient information to allow the insurer to decide whether or not to accept a risk and what conditions to apply if it is accepted.
Liability of the insured to persons who are not parties to the contract of insurance and are not employees of the insured.
A statement by an insurer of the premium he will require for a particular insurance. Generally not open ended and available for a given period of time.
Making 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 instead.
In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn’t fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period.
The process of continuing an insurance from one period of risk to a succeeding one.
An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A reserve is usually treated as a liability.
The identification, measurement and economic control of risks that threaten the assets and earnings of a business or other enterprise.
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. Insureds can generally pay the insurer for salvage if they wish to retain the item.
The part of a policy containing information specific to that particular risk.
Perils specifically covered on insured property.
An alternative to a completed proposal form. A statement provided by the insurer clarifying the basis on which insurance is accepted and what conditions apply.
The right of an insurer who has taken over another’s loss also to take over the other person’s right to pursue remedies against a third party.
Phrase 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.
The maximum amount payable in the event of a claim under a contract of insurance.
A person claiming against an insured. In insurance terminology the first party is the insurer and the second party is the insured.
Insurance contracts are contracts of utmost good faith, which means that both parties to the contract have a duty to disclose, clearly and accurately, all material facts relating to the proposed insurance. Any breach of this duty by the proposer may entitle the insurer to turn down a claim.
A very strict condition in a policy imposed by an insurer. A breach entitles the insurer to deny liability. A Warranty may not necessarily imply something positive.
This is the amount deducted from claims payments to allow for any depreciation in the property insured which is caused by its usage. (Usually found in respect of Household Clothing Claims)