CPCU 520 1-5.txt

A RISK MANAGEMENT TECHNIQUE THAT TRANSFERS SOME OR ALL OF THE POTENTIAL FINANCILA CONSEQUENCES FOR CERTAIN LOSS EXPOSURES FROM THE INSURED TO THE INSURER

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

INSURERES FORMED TO EARN A PROFIT FOR THEIR OWNERS

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

AN ASSOCIATION OF PERSONS OR ORGANIZATIONS THAT COMBINES ITS RESOURCES TO ECONOMICALLY FINANCE RECOVERY FROM ACCIDENTAL LOSSES

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

AN INSURER AUTHORIZED BY THE STATE INSURANCE DEPARTMENT TO RANSACT BUSINESS WITHIN A PARTICULAR STATE

AN INSURER NOT AUTHORIZED BY THE STATE INSURANCE DEPARTMENT TO TRANSACT BUSINESS IN THE INSURED�S STATE

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)

• 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)

THE SUME OF AN INSURER�S LOSS RATIO AND ITS EXPENSE RATIO (CR = (LR)+ (ER))

A PROFITABILITY RATIO CALCULATED BY DIVIDING INCURRED LOSSES AND INCURRED EXPENSES BY EARNED PREMIUMS

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

THE SUM OF UNDERWRITING PROFIT OR LOSS AND INVERSTMENT PROFIT OR LOSS

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."

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

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

A draft regulation that may be implemented by a state insurance department if the model law is passed

An insurer doing business in its home state

A U.S. insurer doing business in a state that is not its home state

An insurer domiciled outside the U.S.

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

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

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

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

State law under which insurance rates must be approved by the state insurance department before they can be used

State law under which insurance rates must be filed with the state insurance department but can then be used immediately

State law under which insurance rates can be put into effect with filing information subsequently submitted and subject to regulatory review

State law under which prior approval is required only if the new rates exceed a certain percentage above (and sometimes below) rates previously filed

A system under which rates do not have to be filed with the state insurance department

State laws that prohibit an insurer from using unfair methods of competition and engaging in unfair acts or practices as defined in the acts

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

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

THE SYSTEM THAT DIRECTS AND FACILITATES THE DESIGN, DEVELOPMENT, SALE, AND SUPPORT OF A PRODUCT OR SERVICE

THE CHANNEL USED BY THE PRODUCER OF A PRODUCT OR SERVICE TO TRANSFER THAT PRODUCT OR SERVICE TO THE ULTIMATE CUSTOMER

AUTHORITY (EXPRESS OR IMPLIED) CONFERRED BY THE PRINCIPLE ON AN AGENT UNDER AN AGENCY CONTRACT

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

AN INSURANCE MARKETING SYSTEM UNDER WHICH PRODUCERS (AGENTS OR BROKERS), WHO ARE INDEPENDENT CONTRACTORS, SELL INSURANCE, USUALLY AS REPRESENTATIVES OF SEVERAL UNRELATED INSURERS

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

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

AN INSURANCE MARKETING SYSTEM UNDER WHICH AGENTS CONTRACT TO SELL INSURANCE EXCLUSIVELY FOR ONE INSURER (OR FOR AN ASSOCIATED GROUP OF INSURERS)

AN INSURANCE MARKETING SYSTEM THAT USES SALES AGENTS (OR SALES REPRESENTATIVE) WHO ARE DIRECT EMPLOYEES OF THE INSURER

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

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

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

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

AN INSURANCE DISTRIBUTION CHANNEL THAT MARKETS DIRECTLY TO THE CUSTOMER THROUGH SUCH DISTRIBUTION CHANNELS AS MAIL, TELEPHONE, OR THE INTERNET

A TYPE OF GROUP MARKETING THAT TARGETS VRIOUS GROUPS BASED ON PROFESSION, ASSOCIATION, INTERESTS, HOBBIES, AND ATTITUDES

THE PROCESS OF DETERMINING WHAT LOSS EXPOSURES WILL BE INSURED FRO WHAT AMOUNT OF INSURANCE, AT WHAT PRICE, AND UNDER WHAT CONDITIONS

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

A SITUATION THAT OCCURS BECAUSE PEOPLE WITH THE GREATEST PROBABILITY OF LOSS ARE THE ONES MOST LIKELY TO PURCHASE INSURANCE

A TANGIBLE CONDITION OF PROPERTY, PERSONS, OR OPERATIONS THAT INCREASES THE FREQUENCY OR SEVERITY OF LOSS

A CONDITION THAT INCREASES THE LIKELIHOOD THAT A PERSON WILL INTENTIONALLY CAUSE OR EXAGGERATE A LOSS

A CONDITION OF CARELESSNESS OR INDIFFERENCE THAT INCREASES THE FREQUENCY OR SEVERITY OF LOSS

A CONDITION OF THE LEGAL ENVIRONMENT THAT INCREASES LOSS FREQUENCY OR SEVERITY

A RATEMAKING TECHNIQUE THAT ADJUSTS THE INSURED�S PREMIUM FOR THE UPCOMMING POLICY PERIOD BASED ON THE INSURED�S EXPERIENCE FROM THER CURRENT PERIOD

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

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

UNDERWRITER WHO IS PRIMARILY RESPONSIBLE FOR IMPLEMENTING THE STEPS IN THE UNDERWRITING PROCESS

UNDERWRITER WHO IS USUALLY LOCATED IN THE HOME OFFICE AND WHO ASSISTS UNDWERWRITING MANAGEMENT WITH MAKIN AND IMPLEMENTIN UNDERWRITING POLICY

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

THER PERCENTAGE OF INSURANCE POLICIES RENEWED

THE RATION OF INSURANCE POLICIES WRITTEN TO THOSE THAT HAVE BEEN QUOTEDC TO APPLICANTS FOR INSURANCE

CONSTRUCTION THAT INCORPORATES LOAD-BEARING MEMBERS AND THAT HAS A FIRE-RESISTANCE RATING OF AT LEAST TWO HOURS

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

MASONRY CONSTRUCTION OR CONSTRUCTION THAT INCLUDES EXTERIOR WALLS OF FIRE-RESISTIVE CONSTRUCTION WITH A FIRE-RESISTANCE RATING OF NOT LESS THAN ONE HOUR

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

CONSTRUCTION THAT HAS LOAD-BEARING COMPLONENTS MADE O WOOD OR OTHER COMBUSTIBLE MATERIALS

THE EXPECTED MAXIMUM AMOUNT OF COMBUSTIBLE MATERIAL IN A GIVEN AREA OF A BUILDING, INCLUDING BOTH STRUCTURAL ELEMENTS AND CONTENTS

A SECTION OF A STRUCTURE SO WELL PROTECTED THAT FIRE CANNOT SPREAD FROM THAT SECTION TO ANTOHER, OR VICE VERSA

A WALL THAT RESISTS THE SPREAD OF FIRE BY SERVING AS A FIRE-RESISTIVE BARRIER

A VERTICAL EXTENSION OF A FIRE WALL THAT EXTENDS ABOVE A ROOFLINE

AN EXTENSION OF A FIRE WALL THROUGH AN OUTER WALL

LOCAL ORDINANCES OR STATE STATUTES THAT REGULATE THE CONSTRUCTION OF BUILDINGS WITHIN A MUNICIPALITY, COUNTY, OR STATE

HAZARDS EXISTING IN ALMOST EVERY CLASS OBUSINESS OCCUPANY, USUALLY REFERRING SPECIFICALLY TO 1) HOUSE CLEANING, 20 HEATING EQUIPMENT, 3) ELECTRICAL EQUIPMENT, AND 4) SMOKING

HAZARD THAT ARE TYPICAL FOR THE CLASS OF LOSS EXPOSURES

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

FIRE PROTECTION EQUIPMENT AND SERVICED MADE AVAILABLE THROUGH GOVERNMENTAL AUTHORITY TO ALL PROPERTIES WITHIN A DEFINED AREA

A DETECTION SYSTEM, TRIGGERED BY SMOKE OR HEAT, THAT SOUNDS A GONG, SIREN, OR ANOTHER AUDIBLE ALER INSIDE OR OUTSIDE THE BUILDING

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

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

AUTOMATIC FIRE SPINKLER SEYTEMS WITH PIPES THAT ALWAYS CONTAIN WATER UNER PRESSURE, WHICH IS RELEASED IMMEDIATELY WHEN A SPRINLIER HEAD OPENS

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

AUTOMATIC FIRE SPRINKLER SYSTEMS WITH AUTOMATIC VALVES CONTROLLED BY SMOKE OR HEAT DETECTORS

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

LOSS EXPOSURES OUTSIDE THE AREA OWNED OR CONTROLLED BY THE INSURED

THAE TOTAL VALUE EXPOSED TO LOSS AT ANY ONE LOCATION FROM ANY ONE EVENT

AN EXTIMATE OF THE LARGEST LIKELY LOSS

DEFINITIONOF THE KINDS OF LOSS EXPOSURES AND COVERAGES THAT CAN BE CLASSIFIED UNDER STATE INSURANCE LAWS AS MARINE AND INLAND MARINE INSURANCE

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

INLAND MARINE CLASSES FOR WHICH ADVISORY ORGANIZATIONS ARE REQUIREDTO FILE LOSS COSTS, RULES, AND FORMS

INLAND MARINE CLASSES RATED ACCORDING TO THE INDIVIDUAL INSURER�S UNDERWRITING PRACTICES

A RISK MANAGEMENT TECHNIQUE TO REDUCE LOSS FREQUENCY OR LOSS SEVERITY

A LOSS CONTROL TECHNIQUE TO LOWER THE FREQUESNCY OF LOSSES

A LOSS CONTROL TECHNIQUE TO LOWER THE SEVERITY OF LOSSES THAT OCCUR