In the Insurance Essentials article series, Axco defines key insurance terms to clarify understanding of the global insurance market and to aid the professional development of those wishing to join or learn more about the industry.
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Here are some key insurance terms and their definitions:
Bancassurance: The distribution of insurance products and the provision of insurance services by banking institutions or by insurance companies wholly or partly owned by banks.
Bancatakaful: A term thought to have derived from the more commonly used 'bancassurance', bancatakful pertains more specifically to the selling of takaful products by banking institutions or by insurance companies wholly or partly owned by banks. Distribution of takaful products through bancatakaful may be facilitated through the use of bank customer databases and existing marketing and sales channels. See also: bancassurance/takaful.
Bankers' Blanket Bond (BBB): A product for financial institutions that provides protection against direct financial loss resulting from fraud or other criminal activities on the part of either the institution's employees or third parties.
Basis point (BPS): One-hundredth of one percentage point (0.01 per cent). Used to express quantifiable data in insurance dealings, as well as movements in interest rates and yields on securities.
Benefit policy: A benefit policy is an insurance policy that pays out fixed benefits in the event of a claim. The amount of the fixed benefits is agreed between the insurer and policyholder before policy inception and is not based on the principle of indemnity, which is intended to restore the insured to the financial position that he or she enjoyed immediately before the loss. Because benefit policies are taken out for personal accident cover and health cover (as well as life insurance and annuities) - and payout when the policyholder suffers an injury, illness or death - the principle of indemnity can not apply, as no price can be put on the value of the loss of a limb or loss of sight or death. As such, insureds are allowed to choose the number of fixed benefits that suits them. CF: indemnity policy.
Bill of lading (B/L, BL, BoL): A shipping document issued by a carrier to a cargo exporter. It describes the goods being shipped and also serves as a receipt and a definition of the contract between the parties involved, outlining the shipowner's duties and responsibilities for the goods from the port of shipment to the port of destination. The bill may be signed with qualification if the goods are in any way unsound; qualified bills are referred to as 'dirty' or 'unclean'.
Binding authority: A legally binding, written temporary agreement through which an insurer or reinsurer grants underwriting authority to an agent or broker to allow that agent or broker to accept business on the (re)insurer's behalf.
Blue card: The blue card system is an international motor insurance scheme in operation in the Association of Southeast Asian Nations (ASEAN) member states. The blue card is an identification card which provides evidence that the driver holds a compulsory motor vehicle insurance policy issued by the appropriate bureau in his or her home country. A blue card is valid for one 12-month period at a time and for one vehicle only. See also: brown card / green card.
Blue water hull: Term used to refer specifically to ocean-going hull. CF: brown water hull.
Boiler and machinery breakdown insurance: A type of cover to protect the insured against loss incurred as a result of boiler breakdown. The insurance often covers repair or replacement costs for the boiler, resultant property damage and third party liability, and the business interruption risk. Boiler insurance is often coupled with machinery breakdown insurance. In recent years, boiler and machinery breakdown insurance has become replaced by equipment breakdown insurance, which covers a broader range of equipment and perils. Related terms: equipment breakdown insurance.
Bonus malus: A motor insurance claims system in which discounts are given for claims-free driving (bonus) and surcharges are imposed when claims are made (malus).
Book of business: The aggregate of policies that an insurer has in force at a given point in time.
Bordereau (Bord): A report containing details of premium and claims. Bordereaux are prepared periodically by cedants for reinsurers to notify them of risks accepted and claims paid.
Bouquet treaty: A reinsurance treaty that combines contracts from different classes of business and usually contains both attractive and unattractive contracts.
Broker: An independent insurance intermediary responsible for placing insurance or reinsurance business. Brokers are independent but work in the interests of their clients rather than the insurance companies with whom they arrange for business to be placed. The term 'broker' may denote the broking company or an individual. Related terms: broker, retail/broker, wholesale/broker, producing/broker, retail.
Broker, retail: Insurance brokers that deal directly with the insureds. They find insurance cover for their clients (the insureds) and, where necessary, provide access to wholesale brokers.
Broker, sub: The term sub-broker is commonly understood to refer to a retail broker. It may sometimes be used to refer to a wholesale broker but this usage is relatively rare.
Broker, wholesale: Wholesale brokers are used by retail brokers and are usually called upon to place larger, more complex or more niche risks and/or provide access to insurance markets to which the retail broker may not have access. Wholesale brokers' clients are the retail brokers rather than insureds; in fact, wholesale brokers seldom have any contact with the insured.
May refer to the work carried out by an insurance broker but more commonly refers to remuneration made to/received by a broker for broking services provided. A brokerage may be in the form of commission from the insurer and/or a fee charged to the broker's client but the typical practice is for one or the other.
International motor insurance scheme established by the Economic Community Of West African States (ECOWAS) to provide evidence of cover for drivers' motor third party liability when driving through states that are signatories to the Brown Card (Carte Brune) system. See also: blue card / green card.
Brown water hull: Term used to refer specifically to vessels on lakes and rivers.cf blue water hullBuilders' risks insurance (marine)Insurance to cover vessels during construction. Related terms: builders' risks insurance (non-marine).
Builders' risks insurance (non-marine): US term for insurance cover purchased by contractors to cover damage to property under construction. The cover is normally written on an all risks basis, with the estimated completed value of the construction project as the sum insured. The cover is commonly referred to as contractors all risks or construction all risks insurance outside the US. Related terms: builders' risks insurance (marine).
Burning ratio: A ratio established by comparing actual losses with the amount of earned premiums. Usually found in treaty reinsurance.
Business interruption (BI): Insurance covering loss of gross profits and other costs resulting from insured property damage. Also known as consequential loss.
This article covers some of the terms you need to know to better understand the insurance industry. If you are interested in learning more, take a look at the various online insurance training programmes we have on offer at the Axco Academy.