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:

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E-banking

See internet banking

Earthquake

A sudden violent shaking of the ground that results from the seismic waves created when the earth's crust convulses.

EF scale

See Enhanced Fujita scale

Electronic data processing insurance (EDP)

Cover against damage to or loss of electronic processing equipment, software and data. The scope of cover usually includes damage or loss resulting from perils such as mechanical and electrical breakdown.

Employee dishonesty insurance

See fidelity insurance

Employers' liability (EL)

A form of insurance designed to protect employers against claims that may be brought against them by their employees for liability in tort. The insurance covers compensation payments to employees who are able to prove the employer's liability for bodily injury or occupational disease that they sustain during or which arises out of the course of their employment, as well as legal fees incurred by the insured in defending a case.

Employment practices indemnity (EPI)

See employment practices liability

Employment practices liability (EPL)

Cover to protect an employer (the insured) against claims from its employees or prospective employees in relation to violations in the employment process and employment practices. Such violations might include harassment or discrimination of any kind, wrongful dismissal, wrongful failure to employ, and wrongful failure to promote. Employment practices liability may be added to a directors' and officers' liability policy or combined with professional liability or fidelity insurance. Cover can be extended to include claims from contractors and consultants.

Enhanced Fujita scale

The Enhanced Fujita scale, implemented in 2007, extends the Fujita scale that was introduced in 1971. The enhanced scale still uses the original Fujita scale values, although these are titled EF0 to EF5 rather than F0 to F5. In addition to this, the Enhanced Fujita scale uses extra calculations for wind and damage and attempts to standardise allocations of the scale values by taking account of differences in buildings structures and standards, and different types of vegetation. Related terms: Fujita scale

Environmental impairment liability (EIL)

A form of cover that protects the insured against legal liability to third parties for personal injury or property damage due to pollution. Environment impairment liability policies often cover clean-up costs associated with pollution, both sudden and gradual, for both the insured and third parties' property.

Equipment breakdown insurance

A more up-to-date form of cover and terminology for boiler and machinery breakdown insurance. Equipment breakdown insurance covers damage to most forms of equipment, such as computers, telephones, air-conditioning and security systems, resulting from such causes as mechanical or electrical breakdown, power surges, or moisture in the atmosphere. The cover often extends to the costs incurred in repairing or replacing both the insured equipment and any other property that may have been damaged by the loss event. An element of business interruption cover is also usually included in equipment breakdown insurance, protecting the insured against any losses in profit and/or on-going expenses that result from the equipment breakdown. Policy conditions that require regular inspections of the insured equipment are a feature of most equipment breakdown policies; these inspections are intended to minimise the possibility of loss events occurring. Related terms: boiler and machinery breakdown insurance

Errors and omissions insurance (E&O)

A type of cover that insures professionals against liability incurred as a result of mistakes or negligence in their professional conduct. 'Errors and omissions' is essentially professional indemnity insurance.

Establishment business

Denotes business that companies acquire in other territories as a result of having established local agency, branch or subsidiary operations or associated companies in those territories. See also: freedom of establishment.

Euro area

Denotes those European Union (EU) member states that have replaced their national currency with the euro (EUR) since its introduction in 1999. At present, the euro area comprises Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain, all of which have currency-issuing rights. The euro is also used in Monaco, San Marino and Vatican City, which have negotiated formal agreements with the EU to use the euro and mint their own coins. Andorra, Kosovo and Montenegro have formally adopted the euro as their sole currency but have no issuing rights.

The euro area integrates the economies of its members but is governed independently by the Eurosystem, comprising the European Central Bank (ECB) and the national banks of all euro area states. The Eurosystem defines the euro area's monetary policy, whilst economic policy remains largely in the hands of the independent members (with euro area-wide coordination).

Euroland

See euro area

European Economic Area (EEA)

The European Economic Area (EEA) comprises all 27 EU member states as well as Iceland, Liechtenstein and Norway. The EEA Agreement, which has been in effect since 1994, allows the EEA-EFTA states to participate in the EU's Internal (Single) Market and in any programmes and agencies relevant to the internal market but withholds their right to vote in these fora. The EEA Agreement is concerned principally with the four basic pillars of the internal market: the freedom of movement of goods, services, persons and capital, and the EEA adopts EU legislation in these areas. EEA states are consulted by the European Commission prior to the drafting of legislation and all new EU legislation which concerns an area covered by the EEA Agreement is integrated into these states' national legislation.

European Free Trade Association (EFTA)

Founded in 1960 by the Stockholm Convention, the European Free Trade Association (EFTA) is an intergovernmental economic organisation which was established for the promotion of free trade and economic co-operation and integration between member states. The association was founded by several states which later joined the European Community (now European Union) and today comprises Iceland, Liechtenstein, Norway and Switzerland. EFTA works in close cooperation with both the European Union and beyond Europe's borders, with free trade agreements now extending as far as Asia and the Americas.

Eurozone

See euro area

Ex gratia

With regard to payment, ex gratia signifies that payment has been made out of goodwill or moral obligation rather than any technical contractual or legal requirement. In insurance terms, ex gratia payments are usually claims payments paid by insurers.

Excepted perils

See excluded perils

Exception

In insurance, 'exception' is normally used interchangeably with the term 'exclusion'. It is sometimes used in its more general sense, however; for example, as an exception to a policy condition or provision. It may even be used to indicate an exception to an exclusion in an insurance policy. See also: exclusion.

Excess

Often used synonymously with 'deductible', 'excess' is used most commonly in the UK and refers to the portion of an insured loss borne by the insured (rather than the insurer). The term tends to be used in reference to the amount borne by an individual with personal insurance, whereas a deductible refers to a large excess, ie one borne by a commercial entity. An excess may be arranged as an agreed amount or an agreed percentage of the policy limit and only once this amount or percentage level is exceeded does the insurer become liable to pay the (remainder of) the claim; in this way, application of an excess reduces the insurer's limit of indemnity. Excesses may be compulsory or voluntary, and a voluntary excess can often be added onto a compulsory excess in order to further reduce the insurer's limit of indemnity and provide the insured with a premium reduction for his or her part in taking on a greater proportion of the risk. Related terms: deductible.

Excluded losses

See excluded perils

Excluded perils

Those perils that are declared in an insurance policy as specifically not covered by that policy. Insurers are not liable for losses caused by perils that have been excluded under the terms of an insurance policy. Compare to: named perils, unnamed perils

Exclusion

A provision of an insurance contract that states that cover is not provided in respect of explicitly specified hazards, property or persons, or in particular situations through which a loss may be incurred. Exclusions may be general or may apply only to specific sections of the contract, and the precise wording of the policy is very important in determining whether an exclusion applies in the event of a given loss. Exclusions are used where certain risks or aspects of a risk are considered uninsurable or entail special treatment. They are commonly used in property 'all risks' policies, where the scope of cover is defined by the exclusions to 'all' the risks covered.

Exclusive agent

See agent, tied

Exemplary damages

See punitive damages

Expense ratio

The ratio of acquisition and administration expenses incurred to premium earned in respect of a particular class of business.

Exposure

The state of being exposed to risk or hazard (and therefore loss).

Extended discovery period

See extended reporting period

Extended reporting period (ERP)

A provision under a claims-made policy for a set period of time following the expiration of the policy during which the insured can still make claims pertaining to losses that occurred during the policy period. The extended reporting period extends the length of time that the policy covers rather than providing any additional or different conditions of cover.