Insurance & Risk Management Jargon Buster
Claim – If and when the policy holder experiences damages or a loss, they will put forward a case to receive a payment according to their policy: the ‘claim’. The insurer or loss adjuster will investigate their claim to see if the insurer is liable to pay the insured party according to the policy agreement.
Diversification – Risk managers and portfolio managers aim to ‘diversify’ the portfolios they work with by investing in different asset classes – some ‘safer’ than others – as part of their strategy to minimise risk.
Policy – The policy is the agreement between the insurance company and the customer. It states the situations and circumstances for which the insurance company will or will not be liable to issue an agreed set out amount to cover losses incurred. The policy documents outline the full terms and conditions of the policy.
Policy holder – The customer who is ‘insured’ by the insurer.
Liability – In the insurance world, ‘liability’ refers to the responsibility of an insurer to pay out on an insurance claim if it is deemed to be valid.
Loss – Another word for ‘claim’.
New for old – When the insurer pays the cost of damaged or lost property regardless of any decrease in its value over time (known as depreciation).
Operational risk – These are the risks posed to a company by the internal systems, departments and the people. Some risk managers will identify possible failings that stem from these areas and come up with the best ways to minimise them.
Premium – The amount a customer pays for an insurance policy.
Underwriting – In an insurance context, this involves assessing the exposures and risks of potential policy holders. Underwriters will look at things such as medical records when determining risk for health insurance. They use their findings to judge whether the insurance company should take on the risk and determine the premium to offer according to their assessments.
Warranty – A condition of the policy contract which allows for an insurer to deny liability for a claim.