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Glossary

1-

Accident

An unforeseen event causing damage to property or bodily injury

2-

Accident Insurance

Insurance Policy against Bodily Injury or Death due to accident. The claim is also paid in case of loss of limbs or eyes.

3-

Arbitration

Settling of a dispute or differences between parties by a neutral person or panel thus rendering a judgement as to the responsibility for or extent of a loss.

4-

Assignment

Legal transfer of ownership of a property, or of benefits, right, liabilities, under a contract, from one party to another.

5-

Assurance

Commonly used in connection with life- policies, an act of assuring the benefits in the case of the event that will certainly happen, sooner or later.

6-

Assured


Beneficiary of a life insurance policy.

7-

Subject to average Clause

A condition in the insurance policy suggesting payments for damage/loss will be in the ratio of the value insured, generally used in cases of under insurance.

8-

Act of God Perils

Natural Risks like Earthquake, Flood, Lightning, etc which are beyond our control

9-

Actuary

A professional who analyses data, design the insurance products and decides on the premiums

10-

Additional Insured 

Normally Lenders, Bankers, Financial Institutions

11-

Agent

A representative of the insurance company authorized to finalize contracts of insurance and provide service to the policyholder on their behalf.

12-

All-Risks Policy


Policy with the broadest form of Insurance cover that includes losses from all causes not specifically excluded in the policy.

13-

Bailee - Bailor

Bailee is the one to whom goods are entrusted for a particular purpose, say safe keeping, by another, called Bailor.

14-

Bailment

Act of delivering goods by the bailor, into the care (not for possession) of someone called bailee.

15-

Bancassurance

Sale of insurance products through the involvement of a bank.

16-

Bill of Lading

Official Document detailing the transfer of goods like item, quantity, value, etc. from a (foreign) supplier to a buyer. It is issued by the carrier to the shipper.

17-

Blanket Insurance

Form of liability insurance designed to provide coverage for - more than a single piece of property, two or more locations, or a combination of property and locations, under a single limit.

18-

Break Bulk

Shipment of goods packed, usually in small separable units like bales, cases, cartons, drums, etc.  but non-containerized.

19-

Broker

A specialist individual or firm, licensed by the IRDA, who represents buyers of insurance and deals with various Insurance companies in arranging for the coverage required by their client.
 

20-

Loss of profit/Business Interruption Insurance

It provides protection against the loss of profit, fixed costs and any additional expenses incurred to the policy holder if his business activities are interrupted due to the occurrence of a peril, such as a fire.

21-

Captive Insurer

A wholly owned subsidiary of a non-insurance entity established for the purpose of insuring the risks of its owner/ owners.

22-

Cargo Insurance

It is a sub branch of Transit insurance. It provides coverage to the shipper of the goods against financial loss if the goods are damaged or lost during shipping whether by land, sea or air.

23-

Cash against Document (CAD)

A transaction in which the title of goods is passed via transfer of documents once the buyer makes the payment in cash. It is used primarily used in exports.

24-

Catastrophe

Sudden occurrence of an event of a calamitous or disastrous nature. E.g. flood, earthquake

25-

Caveat Emptor

Latin term for “let the buyer beware”. This axiom means that the buyer alone is responsible for checking the quality of goods he purchases, and that the law will not help if he buys foolishly.

26-

Certificate of Insurance

A document issued by the Insurance Co. to the policyholder certifying the existence of insurance. Generally, it is issued for Motor and Marine insurances describing in general terms policy provisions for allowances, co-insurance, deductible, eligibility, etc.

27-

Cession

Amount of insurance transferred to a reinsurer (insurer of insurer) by the original insuring company in a reinsurance arrangement.

28-

Claim

Formal notification to an insurance company for payment due to loss or damage covered by an insurance policy.

29-

Claims-Made Policy

Insurance policy in which the insurer must meet claims made only during the time period of the policy. (irrespective of when the loss occurred as in occurrence based policy). Most liability policies are Claims-made.

30-

Coinsurance

Insurance provision under which risk is shared between several insurers or insurer and insured. In the latter definition it is more generally called co-pay. The policy will detail the proportion of the risks shared by each.

31-

Commission

The fee charged by an agent/broker for his services in procuring and servicing the insurance.

32-

Concealment

in the insurance world, it is a conscious act on the part of the applicant/insured to withhold a material fact from the insurer. It renders the insurance policy void.

33-

Provisions/ Clauses

Conditions inserted in an insurance policy that qualify or place limitations on the insurer’s promise to perform.

34-

Consequential Loss policy

A policy that insures against indirect losses, i.e. losses occurring as the consequence of some other loss that was covered, such as fire. It is similar to the loss of profit policy.

35-

Consideration

Premium' is the consideration from the insured and the 'promise to indeminify' is the consideration from the insurer.

36-

Consignment

An arrangement under which goods are shipped to someone (Consignee), usually to care for or sell on behalf of the sender (Consignor).

37-

Insurance Contract

A binding agreement under which the Insurer accepts significant risks from the policyholder by agreeing to compensate in the case of occurrence of the insured event. A contract of insurance is embodied in a written document called the policy.

38-

Contractual Liability

Liability arising out of a contract. The extent to which one holds another liable varies from contract to contract, job to job and so on.

39-

Contractor’s All Risks Policy (CAR)

Policy that covers a wide range of perils, normally associated with a construction project.

40-

Contribution

Portion of loss paid by each insurance company in a contract where a risk has been insured twice over.

41-

Contributory Negligence

An action' that contributes to one’s own injury. In such cases the injured party cannot claim full  compensation as he/she too has contributed to the accident. E.g. Careless driving.

42-

Cover Note

A temporary document issued by an insurance company to an applicant usually as an interim cover, often one month, until a formal Insurance Policy is drawn up and issued.

43-

Cross Liability Endorsement

It arises when there is a claim by one insured for which another insured covered by the same policy may be held liable. This endorsement covers the insured against whom the claim is made in the same manner as if separate policies had been issued. However, it does not operate to increase the insurance company’s overall limit of liability.

44-

Damaged Arrived value

Market value of the goods in damaged condition.

45-

Debris Removal Clause

It indemnifies for expenses incurred in removal of debris, dismantling or pulling down the damaged parts of the structure, and shoring up of the structure.

46-

Excess/ Deductible

An amount which the insured is required and obligated to pay, per claim or per accident, towards the total amount of an insured loss. Generally the lower the deductible, the higher the Insurance Premium. It may be compulsory or voluntary.

47-

Depreciation

A reduction in the value of an asset over a period of time due to wear and tear, age or obsolescence. It is used to determine the actual cash value of property at time of loss.

48-

Directors' and Officers' (D & O) Liability Insurance

Insurance specifically designed to protect a company's directors and officers against third party litigation. It provides cover for their personal liability arising due to wrongful acts, neglect, misstatement or errors in their managerial capacity.
 

49-

Duty of Disclosure

An important element of Insurance contract requiring disclosure of material facts by the insured.

50-

Speculative/Dynamic Risk

As against pure/static risk, dynamic risk may result either in Profit or Loss for the organization. It arises from a human decision and is uninsurable.

51-

Earned Premium

The portion of the total premium that relates to an expired period of policy cover.

52-

Electronic Data Interchange (EDI)

Method of transmitting data between organizations using computers.

53-

Errors and Omissions Insurance (E & O insurance)

A Professional liability Insurance that covers court costs and settlements against claims made by clients for errors and omissions, such as incorrect records or accounting mistakes.

54-

Estimated Maximum Loss (EML)

Used in fire, explosion and material damage insurance policies, it is an estimate of the maximum probable monetary loss that could be sustained on an insured peril.

55-

Estoppel

The law insists that a person must bear liability for previous actions. Estoppel is generally used to prevent a party from making an allegation or a denial of responsibility, for example, the parties to a contract cannot subsequently claim that they were unaware of its conditions.

56-

Excess of Loss

A contract between an insurer and a reinsurer by which the reinsurer bears any loss over a certain stated amount.

57-

Exchange Gain (Loss)

Profit (Loss) made by an importer if there is a favorable (unfavorable) change in the exchange rate.

58-

Expense Ratio

The ratio of a company's operating expenses including acquisition costs to premiums written or earned.

59-

Exgratia Payment

A payment made by a Insurance Co. to policyholders  where a claim does not meet the terms and conditions but the company chooses to make a voluntary payment out of kindness or as a favor, without recognizing any obligation to make such a payment.

60-

Facultative

Individual risk offered by an insurer for acceptance or rejection by a reinsurer. This policy, when accepted, provides an insurer with coverage for specific individual risks that are unusual or so large that they aren't covered in the insurance company's reinsurance treaties.

61-

Fidelity Guarantee Insurance

Commercial insurance that indemnifying employers against financial loss on account of forgery, defalcation, embezzlement and fraudulent conversion by employees.

62-

Fiduciary

A person who holds something in trust for another.

63-

First Loss Insurance

Partial fire/burglary/ theft insurance in which the full value of the insured item is declared, but a lower sum is insured (at a consequently lower premium). Generally used where the value of stocks is considerable and of bulky nature rendering a full loss very unlikely.

64-

Fleet Insurance

Motor insurance policy that covers more than two vehicles from one organization under one policy.

65-

Fortuitous Loss

Unexpected loss that occurs as a result of chance or accident and not by anyone's intention.

66-

Franchise Figure

Similar to deductible, it is an agreed figure below which an insurer does not have to meet a claim. A loss above the franchise figure is paid in full.

67-

Fronting

The use of an insurer to issue an insurance policy on behalf of a captive insurer without the intention of bearing any of the risk. The risk of loss is transferred back to the captive insurer with an indemnity or reinsurance agreement.

68-

General Average

Marine insurance provision whereby a loss, resulting from a deliberate act of sacrifice to save other goods, is shared by the insurers concerned (such as the insurer of a vessel and the insurer of its cargo where part of the cargo has been jettisoned – and lost – to save the ship).

69-

Glass Insurance

Protection for loss of or damage to glass, glass door, glass windows and glass frontage of buildings.

70-

Gross Negligence

The intentional failure of a legal duty with respect to the rights of others.

71-

Group Insurance

Insurance written on a number of people under a single master policy, issued to their employer or to an association/society with which they are affiliated.

72-

Hazard

Process/ phenomenon that can endanger life, health property or environment.

73-

Hull Insurance

Insurance of a vessel and its machinery against physical damage caused by certain perils. It applies to both Aircraft and Ship.

74-

Implied Warranty

A promise, arising by operation of law, that something that is sold will be merchantable and fit for the purpose for which it is sold (not explicitly written into the contract).

75-

Incurred Losses

Claims paid + loss reserves, associated with a particular period of time.

76-

Incurred-But-Not Reported Reserves (IBNR)

Reserves that are established for the amount owed by the insurer for the claims that have occurred but yet to be reported.

77-

Indemnification

Compensation for loss/injury, in whole or in part, by payment, repair or replacement.

78-

Indemnity

Principle of Insurance that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position that existed before the loss. (Except in Life Insurance)

79-

Insurable Interest

Financial or other interest, recognized at law, in the life or property covered by an Insurance contract. An unlimited insurable interest exists in one's own life and the life of a spouse. However, in most cases, insurable interest is limited to the value of the property or goods, or extent of liability.

80-

Insurable Risk

Risk against which insurance cover can be obtained.

81-

Insurance

Form of risk management whereby the insurer agrees to provide compensation to the insured in the event of a specified occurrence, for example, loss of or damage to property. In return, the insured pays the insurer a premium, usually at fixed intervals.

82-

Insured/ Policyholder

Person/Company that holds an insurance policy (a contract with an insurance company). Also called a policyholder.

83-

Insured Peril

Peril that is specifically stated in an insurance policy as being covered.

84-

Insurer

One that insures. Insurance company or other person or company that undertakes to indemnify someone against particular risks, usually as defined in an insurance policy and for an insurance premium.

85-

Insuring Clause

The clause in an insurance policy which sets forth the names of the individual covered, property and location covered, perils covered, inception and termination date..

86-

Intangible Assets

Assets that cannot be seen, touch or physically measured, for e.g., goodwill, honesty, integrity, etc.

87-

Jettison

Throwing overboard of cargo to lighten a vehicle thus preserving property from loss. It is covered under the marine cargo policy.

88-

Jeweler's Block Insurance Policy

Policy providing coverage of the property of jewelers' and the property of others in their care/ custody against probable losses.

89-

Joint- and – Several Liability

A designation of liability by which members of a group are either individually or mutually responsible to a party in whose favor the judgment has been awarded.

90-

Key Man Insurance

Form of business Insurance to cover the life of essential employees in a company. This form of insurance covers also covers the cost of replacing such personnel at short notice by equally qualified temporary staff and any loss of profits incurred in the meantime.

91-

Knock – for – Knock Agreement

Motor insurance agreement between group of insurers whereby they agree to bear the responsibility for damage to its own policyholders' vehicles, so long as the policyholder is covered for such damage regardless of liability.

92-

Lapsed Policy

A policy cancelled for non-payment of premiums.

93-

Larceny

The unauthorized taking, removing, carrying, loading away of another person's property.

94-

Law of Large Numbers

Rule that assumes that the greater the number of exposures, the more closely will actual results approach the sample results obtained from an infinite number of exposures.

95-

Liability

Any legally enforceable obligation.

96-

Liabilities

Portion of a balance sheet which denotes legal obligations of the company, including anticipated future payments or losses.

97-

Liability Insurance

Insurance designed to provide coverage for financial loss due to liabilities resulting from injuries to other persons or damage to their property.

98-

Lien

Legal hold of property as security until such time that an outstanding liability has been repaid.

99-

Lloyd's of London

Incorporated association of insurers providing services worldwide, specializing in marine insurance.

100-

Loading

The amount added to the basic premium to cover expenses, profit and a margin for contingencies.

101-

Loss

Injury/damage sustained by the insured due to a peril covered under the contract of Insurance.

102-

Commercial Adjuster/Loss adjuster

Independent claim specialists who calculate the loss payable in a complex claim. They investigate the incident on behalf of the Insurer.

103-

Loss avoidance

A risk management technique whereby a situation/activity leading to a sure loss is avoided.

104-

Loss control

Action taken by the insured to prevent accident or loss, as suggested by the insurer.

105-

Loss Payable Clause

Clause authorizing payment to someone with an insurable interest in the property, even if he is not the insured. This is generally to protect the lender in mortgage cases.

106-

Loss Ratio

In insurance, the ratio of claims to total premium for a period. It is a measure of the profitability of the insurance business.

107-

Loss Reserve

The amount set aside as the estimated cost of claims which may come up in the future.

108-

Marine Insurance

Insurance of ship and its cargo providing indemnity for property loss, damage and injury to third parties. Marine losses may be of the following types -
Hull – damage to or loss of vessel.
Cargo – goods that have been sold and are being shipped to the buyer.
Duty/Freight – the cost of transporting cargo.
Liability – damage or injury to third parties.

109-

Minor

A person under the age of 18, who cannot legally conduct certain transactions or purchase certain goods.

110-

Misrepresentation

An intentional false, incorrect, improper, or incomplete statement of a material fact.

111-

Moral Hazard

Risk that the party in front has provided misleading information or may take unusual risks in an attempt to earn profit.

112-

Mutual Insurance Company

An insurance company which has no shareholders. Its ownership and control is vested in the policyholders and portion of surplus earnings are paid to policyholders in the form of dividends.

113-

Named Perils

Perils specifically listed in the policy.

114-

Negligence

Failure to exercise due diligence and care that a reasonable and prudent person is expected to use under similar circumstances.

115-

Occupational Hazard

Hazards which are inherent in a particular occupation, industry or work environment. To compensate for the danger involved, people in such jobs are generally paid more.

116-

Overriding Commission

In reinsurance, commission paid to the ceding company which is more than the acquisition cost to allow for additional expenses.

117-

Package Policy

A combination of two or more basic policies or coverage e.g. Motor Package Policy, Householders Package, Shopkeepers Policy, Office Package Insurance etc.

118-

Peril

Any event that causes a loss. Perils may be included or excluded in an insurance policy, for example, an insured peril in a fire policy is fire; an excluded peril is war.

119-

Peril of Nature

In insurance, a class of peril that includes earthquake, flood, hailstones, storm, thunderbolt and subsidence.

120-

Peril of the Sea

All perils which are unique of transportation and which could not be prevented by reasonable efforts, including sinking of the vessel, standing, heavy weather, lightening, collision with other vessels or submerged objects and damage by sea water when caused by an insured peril.

121-

Personal Lines

Property and casualty insurance for individuals or families rather than for business or organizations, such as auto or home insurance.

122-

Physical Damage

Damage to or loss of the property physically, resulting from collision, fire, theft or other perils.

123-

Policy

The legal document issued by an insurance company to a policyholder, which outlines the conditions and terms of the insurance, also called the policy contract or the contract.

124-

Pollution Liability

Exposure to lawsuits for injury or cleanup costs that result from pollution damage. Pollution liability insurance is for businesses and contractors who wish to protect against risks associated with construction and ongoing industrial operations, such as broken pipelines, fuel spills and release of toxic gases.

125-

Pool/ Risk Pool

An organization of insurers or reinsurers through which particular types of risk are underwritten and premiums, losses and expenses are shared in agreed upon amounts. It is generally for catastrophic risks.

126-

Portability in Insurance

The right to transfer rights and credits when changing Insurance companies.

127-

Premium

The sum paid by the insured to the insurer to keep an insurance policy in force.

128-

Probate

Court supervised process of validating or establishing a distribution for assets of a deceased including the payment of outstanding obligations.

129-

Product Liability Insurance

It covers liabilities against financial loss to a manufacturer, merchant, or distributor because of injury or damage due to the use of covered product.

130-

Proof of Loss

Documentary evidence given by an insured to prove the validity of the claim. It usually consists of a claim form completed by the insured, written estimates, receipts, police reports, etc.

131-

Proposal Form

Form filled in by a person wanting to take out insurance. Inaccuracies or omissions (accidental or deliberate) in a proposal may invalidate any insurance policy issued.

132-

Proposer

Individual or company offering or seeking insurance.

133-

Proximate Cause

It is the immediate effective cause of an insured loss. As defined in the case of Pawsey v. Scottish Union & National  “the active efficient cause which sets in motion a train of events, which brings about a result, without the intervension of any force, started and working actively from a new and independent source”. Static/Pure Risk
A risk that can result in either a break-even situation, or a loss, but never a profit.

134-

Risk Avoidance

An action that removes the chance of an adverse outcome happening.

135-

Risk Control

Measures adopted to minimize the effect of an insurable risk, either before or after a loss occurs.

136-

Risk Reduction

Measures that could reduce the chance of losses occurring or the size of such losses.

137-

Risk Retention

Risk retained by a Insurance Co. because it would cost more to insure against it than the loss itself.

138-

Reimbursement

Compensation for damages or losses incurred as a result of an accident or sickness, only to an amount specified in the policy.

139-

Reinstatement

The restoration of coverage under an insurance policy which has lapsed for non-payment of premiums.

140-

Reinsurance

Insurance taken by the Insurance Co. itself to transfer some of its risk.

141-

Renewal

Continuance of coverage under a policy beyond its original term by the insurer's acceptance of the premium for a new policy term.

142-

Replacement Insurance

An insurance rider that guarantees an amount of money needed to replace an asset as mentioned in the policy.

143-

Rider

Optional coverage. It's a provision in an insurance policy allowing for amendments to its terms and/or coverage.

144-

Risk

The chance of loss.

145-

Salvage

 1) Rescuing people or property from a flood, fire, shipwreck or other disaster.

146-

Salvage Value

An estimated value that an asset will be worth at the end of its useful life.

147-

At Sight Bill of Exchange

Bill of exchange payable on presentation of documents i.e. on sight.

148-

Slip

Document submitted by a broker when insurance business is placed with underwriters at Lloyd's of London. It includes the name of the insured, the starting date and period of insurance, the property insured and the period of cover, the premium and commission payable, and any special conditions or limitations.

149-

Sound Arrived value

Market value of the goods in sound condition.

150-

Stop-Loss Insurance

Insurance or reinsurance arrangements against the risk of large losses or severe adverse claim experience. It limits the loss exposure.

151-

Subrogation

Right of an insurer, having indemnified the insured, to avail himself of any rights and remedies of the insured, for example, salvage.

152-

Sum Insured

Maximum amount an insurance company is liable for, under a particular insurance policy.

153-

Surplus Reinsurance

In reinsurance, it is the amount by which the sum insured exceeds the ceding office's retention. The ceding co. sends the insurer the fraction of each risk that exceeds their retention limit.

154-

Surplus Treaty

Reinsurance agreement whereby all risks that exceed a pre-determined amount are reinsured.

155-

Surveyor

Person whose job is to inspect the properties (to be insured/ already insured) and report on its condition. They are often employed by the insurance company.

156-

Tariff

Insurance premiums set through a collective agreement by members or rating bureau and thus is same for a given risk or type of insurance.

157-

Third Party

Person mentioned in a contract but not a party to the contract.

158-

Third-party insurance

Third-party insurance gives the insured cover against claims made by a third party (who is not named in the policy and not a party to it).

159-

Third Party Liability

Liability arising to an insured due to someone who is not party to the contract i.e. other than the insured or the insurer. This party/person is called the third party and the liability to him/her arising under law or contract is called third party liability.

160-

Total Loss

Full loss of an Insured item i.e. when the asset/property is completely destroyed or lost and irretrievable. The full insured value is payable in case of a total loss claim. In motor insurance, if the cost of repairs is more than 75% of the IDV, it is considered a Total Loss.

161-

Through Bill of Lading

A multi-modal bill of lading issued when different ships/ or different means of transportation such as aircraft, rail, truck are to be used in delivering shipments from their point of origin to their final destination.

162-

Theory of Probability

This mathematical theory enables the insurance company to predict potential losses based on a study of the insured's previous loss experiences.

163-

Underwriter

Financial professional or institution that assesses the risk and establishes the rates of premium accordingly.

164-

Underwriting

Process of assessing proposals / risks for insurance.

165-

Unexpired Risk Reserves

Fund that an insurance company creates to cover a shortfall in its unearned premium reserve.

166-

Open Policy/Unvalued Policy

Insurance policy that doesn't specify the value of the subject matter insured. In the event of a claim, the insured must prove the actual value of the item.

167-

Utmost Good Faith

Doctrine which states that the information disclosed in the insurance contract by both the parties is in perfect good faith, concealing nothing. If either party has not acted in the utmost good faith, then the contract may become void.

168-

Valued Policy

Insurance policy that has assigned values to insured items, the values being agreed by the insurer. In the event of a claim for total loss, that sum is paid without negotiating.

169-

Void Contract

A contract that has been cancelled due to fraudulent means of obtaining it or intentional concealment/ misrepresentation of risk. Such a contract is deemed in law never to have existed.

170-

Waiver

Surrender of a legal right/ privilege. E.g. waiver of premium, waiver of the right to subrogation,etc.

171-

Warranty

In insurance, it is a promise made by an insured person and included in the insurance contract that something will, or will not be done; for example, that an alarm system will be maintained and switched on. Breach of warranty allows an insurer to repudiate claim.

172-

Sea Waybill

A waybill is a non-negotiable receipt issued after receipt of the goods by the carrier. It is not a document of title.

173-

Wear and Tear

Loss, damage or depreciation in value of an item due to deterioration through normal use rather than through accident or negligence.

174-

Work in Progress

 In accounting, the value of goods currently under manufacture, but not completed at the end of the accounting period.