CPCU 520 1-5.txt

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CPCU 520 1-5.txt
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2010-05-23 22:06:39
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CPCU 520
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  1. INSURANCE
    A RISK MANAGEMENT TECHNIQUE THAT TRANSFERS SOME OR ALL OF THE POTENTIAL FINANCILA CONSEQUENCES FOR CERTAIN LOSS EXPOSURES FROM THE INSURED TO THE INSURER
  2. LAW OF LARGE NUMBERS
    A MATHEMATETICAL PRINCIPLE STATING THAT AS THE NUMBER OF SIMILAR BUT INDEPENDENT EXPOSURE UNITS INCREASES, THE RELATIVE ACCURACY OF PREDICTIONS ABOUT FUTURE OUTCOMES ALSO INCREASES
  3. PROPRIETARY INSURERS
    INSURERES FORMED TO EARN A PROFIT FOR THEIR OWNERS
  4. COOPERATIVE INSURERS
    INSURERS OWNED BY THEIR POLICYHOLDERS AND USUALLY FORMED POLICYHOLDERS AND USUALLY FORMED TO PROVIDE INSURANCE PROTECTION TO THEIR POLICYHOLDERS AT MINIMUM COST. MUTUAL INSURANCE COMPANIES, RECIPROCAL EXCHANGES, AND FRATERNAL ORGANIZATIONS ARE EXAMPLES OF COOPERATIVE INSURERS
  5. POOL
    AN ASSOCIATION OF PERSONS OR ORGANIZATIONS THAT COMBINES ITS RESOURCES TO ECONOMICALLY FINANCE RECOVERY FROM ACCIDENTAL LOSSES
  6. FAIR ACCESS TO INSURANCE REQUIREMENT (FAIR) PLANS
    AN INSURANCE POOL THROUGH WHICH PRIVATE INSURERS COMLLECTIVELY ADDRSS AND UNMET NEED FOR PROPERTY INSURANCE ON URBAN PROPERTIES, ESPECIALLY THOSE SUSCEPTIBLE TO LOSS BY RIOT OR CIVIL COMMOTION
  7. LICENSED INSURER, OR ADMITTED INSURER
    AN INSURER AUTHORIZED BY THE STATE INSURANCE DEPARTMENT TO RANSACT BUSINESS WITHIN A PARTICULAR STATE
  8. UNLICENSED INSURER OR NONADMITTED INSURER
    AN INSURER NOT AUTHORIZED BY THE STATE INSURANCE DEPARTMENT TO TRANSACT BUSINESS IN THE INSURED�S STATE
  9. EXPENSE RATION
    AN INSURER�S INCURRED UNDERWRITING EXPENSES FOR A SPECIFIC PERIOD DIVIDED BY ITS WRITTEN PREMIUMS FOR THE SAME PERIOD (ER= U/W EXP/ WRITTEN PREMIUMS) OR FINANCIAL CALC (U/W EXP/ EARNED PREMIUMS)
  10. LOSS RATIO
    • AN INSURER�S INCURRED LOSSES (INCLUDING LOSS ADJUSTMENT EXPENSE) FOR A SPECIFIC PERIOD DIVIDED BY ITS EARNED PREMIUMS FOR THE SAME PERIOD
    • (LR= (INCURED LOSS +LOSS ADJUSTMENT)/ EARNED PREMIUMS)
  11. COMBINED RATIO
    THE SUME OF AN INSURER�S LOSS RATIO AND ITS EXPENSE RATIO (CR = (LR)+ (ER))
  12. FINANCIAL BASIS COMBINED RATIO
    A PROFITABILITY RATIO CALCULATED BY DIVIDING INCURRED LOSSES AND INCURRED EXPENSES BY EARNED PREMIUMS
  13. TRADE BASIS COMBINED RATIO
    A PROFITABILITY RATIO CALCULATED BY DIVIDING INCURRED LOSSES AND LOSS ADJUSTEMENT EXPENSES BY EARNED PREMIUMS AND THEN ADDING THE RESULT OF DIVIDING INCURRED UNDERWRITING EXPENSES BY NET WRITTEN PREMIUMS
  14. OPERATING PROFIT OR LOSS
    THE SUM OF UNDERWRITING PROFIT OR LOSS AND INVERSTMENT PROFIT OR LOSS
  15. Commerce Clause of the United States Constitution
    The commerce clause of section 8 of the United States constitution provides that "the congress shall have power to .regulate commerce with foreign nations, and among the several states, and with the Indian tribes."
  16. National Association of Insurance Commissioners (NAIC)
    An association consisting of the insurance commissions of each U.S. state, the District of Columbia, and the U.S. territories and possessions that coordinates regulatory activities among the various insurance departments
  17. Model Law
    A draft bill- the suggested wording of a new law- for consideration by state legislatures, any state may choose to adopt the model bill or adopt it with modification
  18. Model Regulation
    A draft regulation that may be implemented by a state insurance department if the model law is passed
  19. Domestic Insurer
    An insurer doing business in its home state
  20. Foreign insurer
    A U.S. insurer doing business in a state that is not its home state
  21. Alien insurer
    An insurer domiciled outside the U.S.
  22. Surplus lines laws
    State laws that permit producers with a surplus lines license to write business fro an �acceptable� nonadmitted insurer when protection from admitted insurers is not available
  23. Guaranty funds
    State established funds that provide for the payment of unpaid claims of insolvent insurers licensed in that state. Although guaranty funds do not prevent insurer insolvency, they mitigate its effects
  24. Underwriting cycle
    A cyclical pattern of insurance pricing in which a soft market (low rates, relaxed underwriting, and underwriting losses) is eventually followed by a hard market (high rates, restrictive underwriting, and underwriting gains) before the pattern again repeats itself
  25. Mandatory rate law
    State law under which insurance rates are set by a state agency or rating bureau and all licensed insurers are required to use those rates
  26. Prior approval law
    State law under which insurance rates must be approved by the state insurance department before they can be used
  27. File and use law
    State law under which insurance rates must be filed with the state insurance department but can then be used immediately
  28. Use and file law
    State law under which insurance rates can be put into effect with filing information subsequently submitted and subject to regulatory review
  29. Flex rating law
    State law under which prior approval is required only if the new rates exceed a certain percentage above (and sometimes below) rates previously filed
  30. Open Competition system
    A system under which rates do not have to be filed with the state insurance department
  31. Unfair trade practices acts
    State laws that prohibit an insurer from using unfair methods of competition and engaging in unfair acts or practices as defined in the acts
  32. Rebating
    The practice of giving a portion of the producer�s commission or some other financial advantage to an individual as an inducement to purchase the policy
  33. Advisory organization
    Independent corporations that work with and on behalf of insurers that purchase or subscribe to their services. Services include prospective loss costs and standard contract forms
  34. MARKETING SYSTEM
    THE SYSTEM THAT DIRECTS AND FACILITATES THE DESIGN, DEVELOPMENT, SALE, AND SUPPORT OF A PRODUCT OR SERVICE
  35. DISTRIBUTION CHANNEL
    THE CHANNEL USED BY THE PRODUCER OF A PRODUCT OR SERVICE TO TRANSFER THAT PRODUCT OR SERVICE TO THE ULTIMATE CUSTOMER
  36. ACTUAL AUTHORITY
    AUTHORITY (EXPRESS OR IMPLIED) CONFERRED BY THE PRINCIPLE ON AN AGENT UNDER AN AGENCY CONTRACT
  37. APPARENT AUTHORITY
    AUTHORITY THAT ARISES FROM A THIRD PARTY�S REASONALBLE BELIEF BASED ON APPEARANCES CREATED BY A PRINCIPAL THAT AN AGENT HAS AUTHORITY TO ACT ON BEHALF OF THAT PRINCIPAL
  38. INDEPENDENT AGENCY AND BROKERAGE MARKETING SYSTEM
    AN INSURANCE MARKETING SYSTEM UNDER WHICH PRODUCERS (AGENTS OR BROKERS), WHO ARE INDEPENDENT CONTRACTORS, SELL INSURANCE, USUALLY AS REPRESENTATIVES OF SEVERAL UNRELATED INSURERS
  39. MANAGING GENERAL AGENTS (MGA�S)
    INDEPENDENT BUSINESS ORGANIZATIONS THAT FUNCTION ALMOST AS BRANCH OFFICES FOR ONE OR MORE INSURERS AND THAT APPOINT AND SUPERVISE INDEPENDENT AGENTS AND BROKERS FOR INSURERS USING THE INDEPENDENT AGENCY AND BROKERAGE SYSTEM
  40. EXCESS AND SUPLUS LINES (E&S) BROKERS
    PERSONS OR FIRMS THAT PLACE BUSINESS WITH INSURERS NOT LICENSED(NON ADMITTED) IN THE STATE IN WHICH THE TRANSACTION OCCURS BUT THAT ARE PERMITTED(�ELIGIBLE) TO WRITE INSURANCE BECAUSE COVERAGE IS NOT AVAILABLE THROUGH STANDARD MARKET INSURERS
  41. 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)
  42. DIRECT WRITER MARKETING SYSTEM
    AN INSURANCE MARKETING SYSTEM THAT USES SALES AGENTS (OR SALES REPRESENTATIVE) WHO ARE DIRECT EMPLOYEES OF THE INSURER
  43. COLD CANVASS
    ALSO KNOWN AS �COLD CALLING� COLD CANVASS IS AN INSURANCE SALES TECHNIQUE INVOLVING THE SOLICITATION OF INSURANCE PROSPECTS EITHER BY PHONE OR IN PERSON, WITHOUT A PRIOR APPOINTMENT
  44. AGENCY BILL
    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
  45. DIRECT BILL
    A PAYMENT PROCEDURE IN WHICH AN INSURER SENDS PREMIUM BILLS TO THE INSURED, COLLECTS THE PREMIUM, AND SENDS ANDY COMMISSION PAYABLE ON THE PREMIUM COLLECTED TO THE PRODUCER
  46. ALTERNATIVE DISTRIBUTION CHANNELS
    DISTRIBUTION CHANNELS USED BY INSURERS THAT ELECT NOT TO USE AN AGENCY FORCE TO OBTAIN AND SERVICE SUCTOMERS; FREQUENTLY THE CHANNELS ARE TECHNOLOGY DRIVEN (INTERNET, INTERACTIVE VOICE RESPONSE) AN ARE COMBINED WITH TRADITIONAL DISTRIBUTION CHANNELS
  47. DIRECT RESPONSE DISTRIBUTION CHANNEL
    AN INSURANCE DISTRIBUTION CHANNEL THAT MARKETS DIRECTLY TO THE CUSTOMER THROUGH SUCH DISTRIBUTION CHANNELS AS MAIL, TELEPHONE, OR THE INTERNET
  48. AFFINITY MARKETING
    A TYPE OF GROUP MARKETING THAT TARGETS VRIOUS GROUPS BASED ON PROFESSION, ASSOCIATION, INTERESTS, HOBBIES, AND ATTITUDES
  49. UNDERWRITING
    THE PROCESS OF DETERMINING WHAT LOSS EXPOSURES WILL BE INSURED FRO WHAT AMOUNT OF INSURANCE, AT WHAT PRICE, AND UNDER WHAT CONDITIONS
  50. BOOK OF BUSINESS
    A GROUP OF POLICIES, ALSO CALLED A PORFOLIO, WITH A COMMON CHARACTERISTIC, SUCH AS TERRITORY OR TYPE OF COVERAGE, OR ALL POLICIES WRITTEN BY A PARTICULAR INSURER, PRODUCER, OR AGENCY
  51. ADVERSE SELECTION
    A SITUATION THAT OCCURS BECAUSE PEOPLE WITH THE GREATEST PROBABILITY OF LOSS ARE THE ONES MOST LIKELY TO PURCHASE INSURANCE
  52. PHYSICAL HAZARD
    A TANGIBLE CONDITION OF PROPERTY, PERSONS, OR OPERATIONS THAT INCREASES THE FREQUENCY OR SEVERITY OF LOSS
  53. MORAL HAZARD
    A CONDITION THAT INCREASES THE LIKELIHOOD THAT A PERSON WILL INTENTIONALLY CAUSE OR EXAGGERATE A LOSS
  54. MORALE HAZARD
    A CONDITION OF CARELESSNESS OR INDIFFERENCE THAT INCREASES THE FREQUENCY OR SEVERITY OF LOSS
  55. LEGAL HAZARD
    A CONDITION OF THE LEGAL ENVIRONMENT THAT INCREASES LOSS FREQUENCY OR SEVERITY
  56. EXPERIENCE RATING
    A RATEMAKING TECHNIQUE THAT ADJUSTS THE INSURED�S PREMIUM FOR THE UPCOMMING POLICY PERIOD BASED ON THE INSURED�S EXPERIENCE FROM THER CURRENT PERIOD
  57. SCHEDULING RATING
    A RATING PLAN THAT AWARDS DEBITS AND CREDITS BASED ON SPECIFIC CATERGORIES, SUCH AS THE CARE AND CONDITION OF THE PREMISES OR THE TRAINING AND SELECTION OF EMPLOYEES
  58. RETROSPECTIVE RATING
    A RATEMAKING TECNIQUE 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
  59. LINE UNDERWRITER
    UNDERWRITER WHO IS PRIMARILY RESPONSIBLE FOR IMPLEMENTING THE STEPS IN THE UNDERWRITING PROCESS
  60. STAFF UNDERWRITER
    UNDERWRITER WHO IS USUALLY LOCATED IN THE HOME OFFICE AND WHO ASSISTS UNDWERWRITING MANAGEMENT WITH MAKIN AND IMPLEMENTIN UNDERWRITING POLICY
  61. UNDERWRITING AUDIT
    A PROCESS IN WHICH MEMBERS OF AN INSURER�S HOME OFFICE UNDERWRITING DEPARTMENT EXAMINE FILES TO SEE WHETERH UNDWRWRITERS IN BRANCH OR REGIONAL OFFICES ARE FOLLOWING UNDERWRITING GUIDELINES
  62. RETENTION RATIO
    THER PERCENTAGE OF INSURANCE POLICIES RENEWED
  63. SUCCESS RATIO
    THE RATION OF INSURANCE POLICIES WRITTEN TO THOSE THAT HAVE BEEN QUOTEDC TO APPLICANTS FOR INSURANCE
  64. FIRE-RESISTIVE CONSTRUCTION
    CONSTRUCTION THAT INCORPORATES LOAD-BEARING MEMBERS AND THAT HAS A FIRE-RESISTANCE RATING OF AT LEAST TWO HOURS
  65. MODIFIED FIRE-RESISTIVE CONSTRUCTION
    CONSTRUCTION THAT HAS LOAD-BEARING WALLS AND COLUMNS OF MASONRY OR REINFORCED CONCRETE CONSTRUCTION AND THAT HAS A FIRE-RESITANCE RATING ON ONE TO TWO HOURS
  66. MASONRY NONCUMBUSTILBE CONSTRUCTION
    MASONRY CONSTRUCTION OR CONSTRUCTION THAT INCLUDES EXTERIOR WALLS OF FIRE-RESISTIVE CONSTRUCTION WITH A FIRE-RESISTANCE RATING OF NOT LESS THAN ONE HOUR
  67. JOISTED MASONRY CONSTRUCTION
    CONSTRUCTION THAT HAS LOAD-BEARING EXTERIOR WALLS MADE O BRICK, ADOBE, CONCRETE, GYPSUM, STONE, TILE, OR SIMILAR MATERIALS; THAT HAS FLOORS AND ROOFS OF COMBUSTIBLE MATERIALS; AND THAT HAS A FIRE-RESISTANCE RATING OF AT LEAST ONE HOUR
  68. FRAME CONSTRUCTION
    CONSTRUCTION THAT HAS LOAD-BEARING COMPLONENTS MADE O WOOD OR OTHER COMBUSTIBLE MATERIALS
  69. FUEL LOAD, OR FIRE LOAD
    THE EXPECTED MAXIMUM AMOUNT OF COMBUSTIBLE MATERIAL IN A GIVEN AREA OF A BUILDING, INCLUDING BOTH STRUCTURAL ELEMENTS AND CONTENTS
  70. FIRE DIVISION
    A SECTION OF A STRUCTURE SO WELL PROTECTED THAT FIRE CANNOT SPREAD FROM THAT SECTION TO ANTOHER, OR VICE VERSA
  71. FIRE WALL
    A WALL THAT RESISTS THE SPREAD OF FIRE BY SERVING AS A FIRE-RESISTIVE BARRIER
  72. PARPET
    A VERTICAL EXTENSION OF A FIRE WALL THAT EXTENDS ABOVE A ROOFLINE
  73. FENDER WALL
    AN EXTENSION OF A FIRE WALL THROUGH AN OUTER WALL
  74. BUILDING CODES
    LOCAL ORDINANCES OR STATE STATUTES THAT REGULATE THE CONSTRUCTION OF BUILDINGS WITHIN A MUNICIPALITY, COUNTY, OR STATE
  75. COMMON HAZARDS
    HAZARDS EXISTING IN ALMOST EVERY CLASS OBUSINESS OCCUPANY, USUALLY REFERRING SPECIFICALLY TO 1) HOUSE CLEANING, 20 HEATING EQUIPMENT, 3) ELECTRICAL EQUIPMENT, AND 4) SMOKING
  76. SPECIAL HAZARDS OF THE CLASS
    HAZARD THAT ARE TYPICAL FOR THE CLASS OF LOSS EXPOSURES
  77. SPECIAL HAZARDS OF THE RISK
    HAZARDS THAT ARE CREATED BY THE ACTIVITIES OF A PARTICULAR BUSINESS AND THAT ARE NOT TYPICAL OF OTHER BUSINESSES WITH WHICH IT WOULD BE CLASSED
  78. PUBLIC FIRE PROTECTION
    FIRE PROTECTION EQUIPMENT AND SERVICED MADE AVAILABLE THROUGH GOVERNMENTAL AUTHORITY TO ALL PROPERTIES WITHIN A DEFINED AREA
  79. LOCAL FIRE ALRM SYSTEM
    A DETECTION SYSTEM, TRIGGERED BY SMOKE OR HEAT, THAT SOUNDS A GONG, SIREN, OR ANOTHER AUDIBLE ALER INSIDE OR OUTSIDE THE BUILDING
  80. CENTRAL STATION SYSTEM
    A PRIVATE DETECTION SERVICE THAT MONITORS THAT SYSTEMS OF MULTIPLE BUSINESSES AND/OR RESIDENCES AND THAT CALLS APPROPRIATE AUTHORITIES OR DISPATCHES ITS OWN PERSONNEL WHEN AN ALARM IS ACTIVATED
  81. AUTOMATIC SPRINKLER SYSTEMS
    FIRE SPRINKLER SYSTEMS WITH A SERIES OF INTERCONNECTED VALVES AND PIPES WITH SPRIKLER HEADS. EACH SPRINKLER HEAD USUALLY CONTAINS A HEAT-SENSING ELEMENT THAT RESPONDS INDIVIDUALLY TO THE HEAR GERATED BY A FIRE
  82. WET PIPE SPRINKLER SYSTEMS
    AUTOMATIC FIRE SPINKLER SEYTEMS WITH PIPES THAT ALWAYS CONTAIN WATER UNER PRESSURE, WHICH IS RELEASED IMMEDIATELY WHEN A SPRINLIER HEAD OPENS
  83. DRY PIPE SPRINKLER SYSTEMS
    AUTOMATIC FIE SPRINKLER SYSTEMS WITH PIPES THAT CONTAIN COMPRESSED AIRE OR ANOTHER INERT GAS THAT HOLDS A VALVE IN THE WATER LINE SHUT UNTIL AN OPEN SPRINKLER HEAD RELEASES THE GAS AND ALLOWS WATER TO FLOW THROUGH THE PREVIOUSLY DRIY PIPE TO THE SPRINKLER HEAD
  84. PRE-ACTIION SPRINKLER SYSTEMS
    AUTOMATIC FIRE SPRINKLER SYSTEMS WITH AUTOMATIC VALVES CONTROLLED BY SMOKE OR HEAT DETECTORS
  85. DELUGE SPRINKLER SYSTEM
    AUTOMATIC FIRE SPRINKLERS SYSTEMS WITH VALVES THAT REMAIN OPEN AND THAT ARE CONTROLLED BY AN AUTOMATIC FIRE DETECTION DEVICE, SUCH AS A SMOKE OR HEAT DETECTOR
  86. EXTERNAL LOSS EXPOSURES
    LOSS EXPOSURES OUTSIDE THE AREA OWNED OR CONTROLLED BY THE INSURED
  87. AMOUNT SUBJECT
    THAE TOTAL VALUE EXPOSED TO LOSS AT ANY ONE LOCATION FROM ANY ONE EVENT
  88. PORBABLE MAXIMUM LOSS (PML)
    AN EXTIMATE OF THE LARGEST LIKELY LOSS
  89. NATIONWIDE MARINE DEFINITION
    DEFINITIONOF THE KINDS OF LOSS EXPOSURES AND COVERAGES THAT CAN BE CLASSIFIED UNDER STATE INSURANCE LAWS AS MARINE AND INLAND MARINE INSURANCE
  90. NAVIGATION WARRANTY
    PART OF A YACHT INSURANCE POLICY THAT RESTRICTS COVERAGE TO THE NAVIGATIONAL AREA FOR WHICH THE HULL, EQUIPMENT, AND THE OPERATOR�S EXPERIENCE ARE APPROPRIATE
  91. FILED CLASSES
    INLAND MARINE CLASSES FOR WHICH ADVISORY ORGANIZATIONS ARE REQUIREDTO FILE LOSS COSTS, RULES, AND FORMS
  92. NONFILED CLASSES
    INLAND MARINE CLASSES RATED ACCORDING TO THE INDIVIDUAL INSURER�S UNDERWRITING PRACTICES
  93. LOSS CONTROL
    A RISK MANAGEMENT TECHNIQUE TO REDUCE LOSS FREQUENCY OR LOSS SEVERITY
  94. LOSS PREVENTION
    A LOSS CONTROL TECHNIQUE TO LOWER THE FREQUESNCY OF LOSSES
  95. LOSS REDUCTION
    A LOSS CONTROL TECHNIQUE TO LOWER THE SEVERITY OF LOSSES THAT OCCUR

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