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cafeteria
plan
An employee benefit plan which gives each employee several choices as
to the types and/or amounts of group benefits. Also known as a flexible
benefit plan.
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Canada Pension Plan (CPP)
A plan that primarily provides retirement income and long-term disability
income benefits to residents of Canadian provinces other than Quebec.
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Canadian Council of Insurance
Regulators (CCIR)
A Canadian organization of provincial insurance regulators who meet
regularly to discuss insurance issues and to develop model insurance
legislation that it encourages provincial legislatures to adopt. Similar
to the National Association of Insurance Commissioners in the United
States.
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Canadian Life and Health
Insurance Association (CLHIA)
An association of most of the life and health insurance companies in
Canada which conducts research on insurance issues and promotes the
best interests of the insurance industry. The CLHIA is the primary source
of information about the life and health insurance industry in Canada.
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Canadian Life and Health
Insurance Compensation Corporation (CompCorp)
In Canada, a federally incorporated, nonprofit company established by
the Canadian Life and Health Insurance Association (CLHIA) in order
to protect consumers against loss of benefits in the event a life or
health insurance company becomes insolvent.
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Canadian method
A method prescribed in Canada for calculating modified net premiums
and reserves.
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cancellable policy
An individual health insurance policy that can be terminated at any
time by the insurer. See also conditionally renewable policy, guaranteed
renewable policy, noncancellable and guaranteed renewable policy, noncancellable
policy, and optionally renewable policy.
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capacity
The largest amount of insurance an insurer or a reinsurer is willing
or able to underwrite. The term can refer to an insurer's capacity on
one individual or to the insurer's capacity for all its business.
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capitation
A method of paying medical providers through a prepaid, flat monthly
fee for each covered person. The payment is independent of the number
of services received or the costs incurred by a provider in furnishing
those services.
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capitation basis
A compensation plan used in some health maintenance organizations (HMOs)
in which a physician is paid a flat amount per year per subscriber who
has elected to use that physician. For that amount, the physician must
treat the subscriber as often as necessary during that year. See also
fee schedule basis.
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captive agents
See exclusive agents.
captive insurance company
An insurance company, formed and controlled by a separate company, whose
purpose is to provide insurance to the controlling company. Companies
which form captive insurance companies include all types of companies
which extend credit to customers, including banks and retailers. See
also agent-owned reinsurance company (AORC).
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career agent
A full-time commissioned salesperson who works out of an insurance company's
field office, holds an agent contract with that company, and sends all,
or almost all, of his or her business to that company. A career agent
may occasionally broker business with other companies.
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career average (career
earnings) benefit formula
A type of defined benefit formula in which the retirement benefit amount
is derived on the basis of a participant's compensation during the entire
period of participation in the plan. See also defined benefit formula.
Contrast with final average benefit formula.
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carry-over provision
A provision found in most medical expense policies stating that expenses
incurred during the last three months of a benefit period that are used
to satisfy the current benefit period's deductible may be used to satisfy
any or all of the following benefit period's deductible.
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case management
A cost-containment program designed to identify alternate, less costly
methods of treatment for seriously ill patients without sacrificing
the quality of care a patient receives. Also known as catastrophic claim
management, large claim management, or medical case management.
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cash-balance pension
plan
A type of defined benefit plan in which each participant has an account
which is credited with amounts reflecting the employer's contributions
and amounts reflecting investment interest. The balance in the account
indicates the participant's accrued benefit. Upon retirement or withdrawal,
the participant may receive the full account balance in a lump sum,
provided that the benefits are fully vested, or may use the account
balance to purchase an annuity.
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Cash or Deferred Arrangement
(CODA)
See Section 401(k) plan.
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cash payment option
A life insurance policy dividend option under which policy dividends
are paid to the policyowner in cash.
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cash premium accounting
system
A premium accounting system used for industrial insurance. Under this
system, the agent informs the home office of the amount collected on
each policy. The home office then updates the policy records to reflect
these collections and prepares new route collection records. Contrast
with advance and arrears system.
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cash refund option
A form of the life income option with refund which specifies that any
proceeds remaining when the beneficiary dies will be paid in a lump
sum to the contingent payee. Contrast with the installment refund option.
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cash surrender value
In a life insurance policy, the amount of money, adjusted for factors
such as policy loans or late premiums, that the policyowner will receive
if the policyowner cancels the coverage and surrenders the policy to
the insurance company. Also called the net cash value. Compare to cash
value.
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cash surrender value
option
A life insurance policy nonforfeiture option which specifies that a
policyowner who discontinues premium payments can elect to surrender
the policy and receive the policy's cash surrender value.
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cash value
In a life insurance policy, the amount of money, before adjustment for
factors such as policy loans or late premiums, that the policyowner
will receive if the policyowner allows the policy to lapse or cancels
the coverage and surrenders the policy to the insurance company. Cash
values are a feature of most types of permanent life insurance, such
as whole life and universal life. Compare to cash surrender value. Also
called inside build-up and policyowner's equity.
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catastrophic claim management
See case management.
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causal relation requirements
Proof required by statute in Kansas, Missouri, Rhode Island, and Puerto
Rico to show that the facts misrepresented in an application for insurance
were related to the loss insured against.
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ceding company
In a reinsurance transaction, the insurer that purchases reinsurance
to cover all or part of those risks that it does not wish to retain
in full. Also called the direct insurer, direct writer, or direct-writing
company.
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certain payment
A payment that will definitely be made under any circumstances, its
payment not being contingent upon any predesignated condition.
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certificate of assumption
In assumption reinsurance, a certificate sent to each policyholder whose
policy has been ceded to give the policyowner (1) notice of the assumption
and (2) information concerning the new insurer.
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certificate of authority
(1) A document created by an insurer detailing the authority granted
to an agent or group of agents to act on behalf of the insurer. (2)
In the United States, a certificate issued by a state's insurance department
authorizing an insurer to issue certain types of insurance within the
state.
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certificate of indebtedness
A certificate issued by an insurer to the beneficiary of a life insurance
policy that specifies a guaranteed minimum interest rate and the frequency
with which the insurer will make interest payments under the interest
settlement option.
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certificate of insurance
A document given to each person insured by a group insurance plan. This
document shows the type and amount of coverage to which the group member
is entitled and the beneficiary of the coverage. The certificate may
also contain a summary of the contract terms as they affect individual
group members. See also master contract.
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cession
(1) In reinsurance, the act of ceding. (2) In reinsurance, a parcel
or unit of insurance that a company cedes to a reinsurer.
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change of condition provision
An insurance provision stipulating that, for a policy to become effective,
all conditions described in the application must still be true at the
time of delivery.
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change of occupation provision
An individual health insurance policy provision that grants the insurer
the right to adjust a policy's premium rate or benefits when the insured
changes jobs or careers.
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CICA
The CICA, together with the provincial and territorial institutes of
chartered accountants, represents a membership of 60,000 professional
accountants in Canada and Bermuda. The CICA sets accounting and auditing
standards for business, not-for-profit organizations and government.
It issues guidance on control and governance, publishes professional
literature, develops continuing education programs and represents the
CA profession nationally and internationally.
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claim
A request for payment under the terms of an insurance policy.
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claim administration
department
The department in a life and health insurance company responsible for
processing claims. In this department, claim examiners review claims
presented by policyowners or beneficiaries, verify the validity of claims,
and authorize the payment of benefits to the proper person.
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claimant
The person or party making a formal request for payment of benefits
due under the terms of an insurance contract.
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claim examiner
An employee of an insurance company whose responsibilities include investigating
claims, approving the claims that are valid, and denying those that
are invalid or fraudulent.
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claim frequency rate
In health insurance calculations, the claim frequency rate is the expected
percentage of insured people who will file claims and the number of
claims they will file during a given period. The claim frequency rate
is used to calculate average claim costs, which are used to calculate
premium rates.
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claim investigation
The process of obtaining necessary claim information in order to decide
whether or not to pay a claim.
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claim reserve
A claim department's estimate of the amount of money needed to pay a
claim. The estimate is made with the help of information that the claim
department gathers in the course of handling the claim. This information
may involve, for example, the extent to which the claim is covered by
the policy, the effect of previously paid claims on the amount of coverage
available to pay a current claim, and the effect of any applicable reinsurance
coverage on the claim.
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class beneficiary designation
A beneficiary designation that names several people as a group -- for
example, "children of the insured" -- rather than naming each person
individually.
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clean-up fund
A lump-sum life insurance death benefit designed to pay the insured's
outstanding debts and final expenses.
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CLHIA Guidelines
Recommendations to insurance companies adopted by the Canadian Life
and Health Insurance Association (CLHIA). Insurers are expected to abide
by these guidelines as a condition of membership in the CLHIA.
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closed contract
An insurance contract in which the terms of the insurance contract and
the application constitute the entire agreement between the policyowner
and the insurer. Commercial insurance companies use closed contracts.
See also open contract.
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closing
The process of securing a purchase commitment from a prospect by requesting
and obtaining the prospect's agreement to submit an application for
the coverage recommended in a sales proposal.
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COBRA
The Consolidated Omnibus Budget Reconciliation Act of 1985, commonly
known as COBRA, requires group health plans with 20 or more employees
to offer continued health coverage for you and your dependents for 18
months after you leave your job. Longer durations of continuance are
available under certain circumstances. If you opt to continue coverage,
you must pay the entire premium, plus a two percent administration charge.
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coinsurance
The amount you are required to pay for medical care in a fee-for-service
plan or preferred provider organization (PPO) after you have met your
deductible. The coinsurance rate is usually expressed as a percentage
of charges. For example, if the insurance company pays 80 percent of
the claim, you pay 20 percent.
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coinsurance provision
A stipulation found in most health insurance policies that requires
an insured to pay a stated percentage, in excess of the deductible,
of all eligible medical expenses.
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COLA
See cost-of-living adjustment (COLA).
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collateral assignment
A transfer of some ownership rights in a contract from one party to
another, generally for a temporary period. Insurance policies are often
assigned as collateral for a loan, in which case all transferred rights
revert to the assignor when the loan is repaid. See also assignment.
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combination company
A life and health insurance company that sells both industrial and ordinary
insurance products.
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combination clause
A clause in a disability income contract that specifies a point at which
the definition of total disability will no longer be based on an insured's
inability to perform his or her "own occupation" but on the insured's
inability to perform "any occupation."
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combination dental plan
A dental plan which contains features of both scheduled and nonscheduled
plans. Typically, combination plans cover preventive and diagnostic
procedures on a nonscheduled basis and other services on a scheduled
basis. See also nonscheduled dental plan and scheduled dental plan.
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combination plan
A pension plan which employs an approach to funding wherein part of
the funding is allocated and part is unallocated. The allocated part
of the employer's contribution is used to purchase annuities or life
insurance contracts with cash values. The unallocated part is placed
in a side fund, also called a conversion fund. See also allocated funding
and unallocated funding.
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commission
The amount of money paid to an insurance agent for selling an insurance
policy. A commission is almost always calculated as a percentage of
the premium.
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Commissioners Method
A method prescribed in the United States for calculating modified net
premiums and reserves for life insurance policies.
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common accident provision
(1) A provision of many medical expense insurance contracts which specifies
that, if two or more members of the same family are injured in the same
accident, their combined medical expenses will only be subject to one
deductible. (2) A provision found in many voluntary group accidental
death and dismemberment plans which specifies that the amount payable
by the insurance company is limited to a stipulated maximum for all
employees killed or injured in a single accident.
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common disaster clause
A life insurance policy provision which states that the primary beneficiary
must survive the insured by a specified period, such as 60 or 90 days,
in order to receive the policy proceeds. Otherwise, the policy proceeds
will be paid as though the primary beneficiary had died before the insured.
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community-rating
Applying the same premium rate structure to certain group insurance
subscribers, regardless of their past or potential loss experience.
See also pooling.
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commuted value
In Canada, the present value of the pension benefits expected to be
paid to a retiree from the date of retirement until death.
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company retention method
A method of comparing the costs of various life insurance policies wherein
the present value of premiums, cash values, and dividends is calculated
by weighting each item each year by the probability that it will be
paid. See also cost comparison methods.
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comprehensive major medical
insurance
A form of health insurance coverage that combines the features and benefits
of a hospital-surgical expense policy and the features and benefits
of a major medical policy.
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concurrent review
A component of a utilization review program that monitors an insured's
care while the insured is hospitalized and encourages the dismissal
of an insured from the hospital as soon as the insured's medical condition
no longer warrants continued in-patient care.
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conditionally renewable
policy
A health insurance policy that grants an insurer the right to refuse
to renew the policy for reasons specified in the policy at the end of
a premium payment period. See also cancellable policy, guaranteed renewable
policy, noncancellable and guaranteed renewable policy, noncancellable
policy, and optionally renewable policy.
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conditional premium receipt
A type of premium receipt given when the applicant pays the initial
premium and under which life insurance will become effective before
a policy is issued only if the proposed insured is found to be insurable.
Also called a conditional receipt. Compare to binding premium receipt.
See also approval type temporary insurance agreement and insurability
type temporary insurance agreement.
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confirmation certificate
A certificate issued to the beneficiary of a life insurance policy that
outlines the amount of life insurance proceeds in a retained asset account,
the account number, and the current interest rate.
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conservation
An agent's or an insurer's efforts to prevent a policy from lapsing.
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Consolidated Omnibus
Budget Reconciliation Act of 1985 (COBRA)
In the United States, a statute which requires that employers sponsoring
group health plans offer continuation of coverage under the group plan
to employees and their spouses and dependent children who have lost
coverage because of the occurrence of a "qualifying event." Qualifying
events include reduction in work hours, many types of termination of
employment, death, and divorce.
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constructive delivery
Legally equivalent to physical delivery of a policy. Constructive delivery
occurs (a) when an insurer parts with control of the policy with the
intention that the insurer will be unconditionally bound by the policy
as a completed instrument or (b) when the policy is physically delivered
to an agent of the applicant.
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consumer report
As defined by the Fair Credit Reporting Act, a consumer reporting agency's
communication of any information pertaining to an individual consumer's
creditworthiness, credit standing, credit capacity, general reputation,
or personal characteristics.
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consumer reporting agency
Any person or organization that regularly prepares consumer reports
and furnishes them, either for profit or on a cooperative, nonprofit
basis, to other persons or organizations. Also called a credit reporting
agency. See also Fair Credit Reporting Act (FCRA).
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contestable period
The period of time (usually two years) during which an insurer may challenge
the validity of a life insurance policy. See also incontestable clause.
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contingencies
Events that are possible but that may or may not happen. Insurers base
their premium rates and their willingness to accept risks partly on
the probability that certain contingencies will or will not occur.
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contingency reserve
A voluntary reserve established by an insurance company to help pay
any unusual and unexpectedly large claim amounts. See also special surplus
funds.
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contingent beneficiary
The party designated to receive life insurance policy proceeds if the
primary beneficiary should die before the person whose life is insured.
Also called the secondary beneficiary or the successor beneficiary.
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contingent payee
The party who will receive any life insurance policy proceeds that are
still payable under a settlement option at the time of the primary payee's
death. Unlike the contingent beneficiary, the contingent payee's rights
do not end when the insured dies. Also called the successor payee.
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contingent payment
A payment that will be made only if some predesignated condition is
met, such as the recipient being alive.
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continuance tables
Tables containing morbidity statistics that indicate the distribution
of claims according to the duration of the illness or amount of expense
involved in the claims.
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continuous-premium whole
life insurance
A type of whole life insurance in which premiums are payable until the
death of the insured. Also called straight life insurance.
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contract of adhesion
A legally binding agreement that is prepared by one party and that must
be accepted or rejected as a whole by the other party, without any bargaining
between the parties to the agreement. Insurance contracts are contracts
of adhesion.
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contract of indemnity
A type of contract in which the amount of the benefit to be paid is
based on the actual amount of financial loss as determined at the time
of loss. For example, many hospital expense insurance contracts are
contracts of indemnity. See also valued contract.
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contributed surplus
On a Canadian life insurance company's balance sheet, the amount in
excess of par value paid in by stockholders minus the amount of dividends
paid to stockholders.
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contribution limit
The maximum annual addition permitted by law to be made to a participant's
account in a defined contribution pension plan.
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