Insurance glossary

Abandonment

The policyholder's relinquishment of its rights to the insured property in favour of the insurer in exchange for payment of the full sum insured. The policyholder resorts to abandonment in order to be released from the obligation to prove the extent of the losses it has suffered as a result of the insured event.

Accident

An event (occurrence) that happened suddenly and against a person's will as a result of an external mechanical, electrical, chemical or thermal impact on the insured person's body, resulting in harm to health, injury or death.

Actuarial calculations

Economic and mathematical calculation methods used by an actuary in calculating insurance reserves

Actuary

An individual licensed by the authorized body who carries out activities related to economic and mathematical calculations of the amount of liabilities and premium rates under insurance and reinsurance contracts, and who also assesses the profitability and yield of the classes of insurance written and planned by an insurance (reinsurance) company in order to ensure the required level of its solvency and financial stability

Addendum

A written supplement to a previously concluded insurance or reinsurance contract containing changes, agreed between the parties, to the terms previously stipulated in the contract. It may entail a change in the premium rate and corresponding settlements under the policy concerned.

Adjuster (claims adjuster)

An employee of an insurance (reinsurance) company whose functions include reviewing claims for insurance payment and assessing the loss caused by an insured event

Agency agreement (mandate agreement)

A contract concluded between the parties in writing under which one party (the insurance agent) undertakes, for remuneration, to provide intermediary services in concluding insurance contracts on behalf of and as instructed by the other party (the insurance company), within the powers provided for by the current legislation of the RK and the internal documents of the insurance company.

Agency commission

Payment for an agent's services for performing the relevant duties (instructions) in the interests and on behalf of the insurance company, in accordance with the terms of the agency agreement.

Annuity

A sum or sums paid periodically by the insurer during the term established by the contract as an insurance benefit (regular income) in the amount specified in the contract. Payments are made upon the occurrence of the insured event(s) provided for by the contract – for example, reaching the age stipulated in the contract – or in the case(s) provided for by the insurance rules

Average adjuster

Persons with knowledge and experience in inland water transport who prepare the average adjustment (dispache), i.e. the calculation of general average losses to be apportioned among the parties involved in the carriage

Beneficiary

A person who enjoys benefits under a contract or other lawful grounds, including a person in whose interests trust ownership is exercised, or the recipient of money under a letter of credit or an insurance policy. Insurance broker: a legal entity that represents the policyholder, on the policyholder's instructions, in relations with the insurer connected with the conclusion and performance of insurance contracts, or that carries out, in its own name, intermediary activities providing services related to the conclusion of insurance or reinsurance contracts, as well as consulting on insurance and reinsurance matters

Beneficiary (payee)

An individual or legal entity that, under the insurance contract or legislative acts on compulsory insurance, is the recipient of the insurance payment.

Bodily injury

A violation of the physical integrity of the body sustained by the insured person during the term of the insurance contract, caused directly and independently of any other causes by an irresistible, accidental, visible external impact

Cargo

Insurance of goods in transit

Cargo insurance

A set of classes of insurance providing for insurance payments as partial or full compensation of damage to a person's property interests related to the possession, use and disposal of cargo, including baggage, goods and all other types of products, caused by their damage, destruction or loss, regardless of the mode of transportation

Cedent

An insurance company that places a risk, i.e. cedes a risk to reinsurance

Cession

The assignment or transfer to other persons of one's right to own or receive property or funds (assignment of a claim). It is used to denote the transfer of a risk to reinsurance. In this case, the reinsured acts as the cedent and the reinsurer as the cessionary

Cessionary (reinsurer)

An insurance company that accepts a risk for reinsurance (the reinsurer)

Civil liability insurance

A set of classes of insurance providing for insurance payments as partial or full compensation of damage to a person's property interests related to that person's obligation to compensate damage caused to third parties, in respect of all insured risks

Co-insurance

The activity and related relations arising from the simultaneous acceptance of insurance risks under an insurance contract by several insurance companies, with their liability distributed in accordance with the co-insurance agreement concluded between them

Compulsory insurance

Insurance carried out by virtue of the requirements of legislative acts, the terms of which are determined by agreement of the parties unless otherwise established by the legislative acts governing compulsory classes of insurance. A compulsory insurance contract may be concluded only with an insurer licensed to carry out that class of insurance

Cover note

A document confirming the obligation of a reinsurance company in respect of the share of risk it has accepted for reinsurance, issued by an insurance broker for each individual reinsurance contract. It sets out the main terms of the reinsurance contract, and the reinsurance company marks on it (by signature of an authorized person or seal) the share of risk (portion of the sum insured) it has accepted for reinsurance, stating its full name. A reinsurance cover note is drawn up in accordance with established business practice on the international insurance market

Currency of insurance

The currency in which the insurance is concluded. The premium is payable and insurance indemnity amounts are paid in the currency of insurance. It must be specified in the insurance contract

Damage

Losses, unforeseen expenses, loss of property and money, lost profit, or harm in the form of loss of property of legal entities and individuals as a result of harm caused or failure to perform obligations undertaken towards them

Deductible (franchise)

The part of the losses of a person insuring property that, under the terms of insurance, is not subject to compensation by the insurer. It is set either as a percentage of the sum insured or as an absolute amount. There are two types of deductible: conditional (non-deductible, franchise) and unconditional (deductible). In the first case, the insurer is released from liability for damage not exceeding the set franchise amount, but must compensate the damage in full if it exceeds that amount. With an unconditional deductible, the damage is in all cases compensated less the set amount.

Disability

The degree of limitation of a person's vital activity resulting from impaired health with a persistent disorder of bodily functions

Double insurance

Double (multiple) insurance is the insurance of the same subject matter with several insurers under separate contracts with each of them. In double insurance of property, each insurer is liable to the policyholder within the limits of the contract concluded with it; however, the total amount of insurance payments received by the policyholder from all insurers may not exceed the actual loss. The policyholder is entitled to receive an insurance payment from any insurer up to the sum insured provided for by the contract concluded with that insurer. If the insurance payment received does not cover the actual loss, the policyholder is entitled to recover the shortfall from another insurer

Duty to mitigate losses

Upon the occurrence of an insured event provided for by a property insurance contract, the policyholder (insured) must take measures that are reasonable and available in the circumstances to prevent or reduce possible losses, including measures to save and preserve the insured property

Emergency medical care

A set of measures for providing qualified medical care to patients with acute illnesses or injuries at all stages of treatment (outpatient clinic — ambulance service — hospital)

Facultative reinsurance

An agreement between the reinsured (cedent) and the reinsurer under which the reinsurer becomes obliged to make a reinsurance payment upon the occurrence of an insured event under the insurance contract to which the reinsurance cover applies, while the reinsured undertakes to pay the reinsurer the reinsurance premium and to perform other obligations stipulated by the agreement

Fear

Fear is an emotion that arises in situations threatening the biological or social existence of an individual and is directed at the source of a real or imagined danger. Unlike pain and other forms of suffering caused by the actual effect of factors dangerous to existence, fear arises when such factors are anticipated. Depending on the nature of the threat, the intensity and specific character of the experience of fear vary across a fairly wide range of shades (apprehension, fear, fright, terror). Functionally, fear serves to warn the subject of impending danger, helps focus attention on its source and prompts the search for ways to avoid it. When fear reaches the strength of an affect (panic fear, terror), it can impose species-typical behavioural stereotypes (flight, freezing, defensive aggressive behaviour). The fear response appears at the earliest stages of both phylogenesis and ontogenesis without any visible influence of learning. Initially it is triggered by genetically fixed unconditioned stimuli (for example, a sudden intense stimulus, pain, novelty); however, owing to the pronounced tendency of fear to leave traces (conditioning), which often occurs in the manner of imprinting, the range of influences that evoke it can expand rapidly. In human social development, fear acts as one of the means of upbringing: for example, an instilled fear of moral or criminal condemnation is used as a factor regulating behaviour. Since in society an individual enjoys the protection of legal and other social institutions, an increased human tendency towards fear loses its adaptive value and is traditionally viewed negatively. Established fear responses are relatively persistent and can remain even when their pointlessness is understood. Therefore, building resilience to fear is usually aimed not at ridding a person of it, but at developing the ability to keep self-control when it is present. Inadequate fear responses are observed in various mental disorders (for example, phobias).

Force majeure

Extraordinary and unavoidable circumstances, such as natural disasters, military operations, etc.

Fronting

Accepting risks for insurance or reinsurance in order to transfer them in full (100%) to other insurance or reinsurance companies, often at the latter's request and for an appropriate fee

Gross rate (gross premium rate)

The premium rate at which the policyholder pays the insurance premium, consisting of the net rate and a loading used, for example, to cover the insurer's administrative expenses of conducting insurance operations, unforeseen expenses and profit

Group insurance

Under group insurance, a single insurance contract covers several insured persons who are at the same time the beneficiaries.

Illness (disease)

Any impairment of health not caused by injury that has objective manifestations allowing a diagnosis to be made.

Insurable interest

The measure of financial interest in insurance.

Insurance

INSURANCE – a method of reducing risk by guaranteeing compensation of potential losses to the injured party. Losses are compensated from an insurance fund that is formed from the contributions of policyholders who fear losses and is managed by the insurer that guarantees their compensation. Insurance is one of the most important components of the service sector. Although insurance does not create new goods, distributing the losses of any policyholder among all participants of the insurance fund makes their activities safer. Without insurance, many types of business activity involving uncertainty and risk would be impossible.

Insurance agent

An individual or legal entity entered in the register of insurance agents that carries out intermediary activities in concluding insurance contracts on behalf of and as instructed by one or more insurance companies on the basis of an agency agreement

Insurance contract

Under an insurance contract, one party (the policyholder) undertakes to pay the insurance premium, and the other party (the insurer) undertakes, upon the occurrence of an insured event, to make an insurance payment to the policyholder or another person in whose favour the contract was concluded (the beneficiary), within the amount specified in the contract (the sum insured).

Insurance coverage (sum insured)

In property insurance, the absolute (monetary) expression of the amount for which individual objects or all of the policyholder's property are insured. The concept of insurance coverage is also used to assess the total liabilities of an insurance company across all the classes of insurance it writes

Insurance market

A system of economic relations arising from the purchase and sale of a specific commodity, “insurance cover”, in the process of meeting society's needs for insurance protection

Insurance policy

A document issued by the insurer to the policyholder that constitutes the insurance contract. Policy forms for compulsory classes of insurance must have at least three levels of protection against counterfeiting, of which microtext, an invisible element detectable under ultraviolet light, and a guilloche (tangir) pattern are mandatory. The text of the policy form must be in two languages: the state language (Kazakh) and Russian

Insurance rate (tariff)

The price of a unit of insurance cover. Methods of calculating insurance rates determine the following components of the rate: 1) net rate; 2) risk loading (safety margin); 3) expense loading; 4) gross rate.

Insurance supervision

Control over the activities of insurance market participants exercised by state authorities

Insurance valuation

The process of determining the actual value of movable and immovable property that is being accepted or has been accepted for insurance. On the basis of the insurance valuation, the sum insured is calculated and the extent of the loss incurred and the amount of the insurance payment are determined

Insured event

An event upon whose occurrence the insurance contract provides for an insurance payment

Insured person

The person in respect of whom insurance is effected

Insurer

A legal entity that, under an insurance contract and for a certain consideration (insurance premium), assumes the obligation to compensate the policyholder or another person in whose favour the insurance has been taken out for losses arising from the occurrence of insured events specified in the contract

Insurer's limit of liability

The insurer's maximum liability arising from the terms of the insurance contract.

Liability

The insurer's obligation to pay the policyholder the insurance indemnity or the sum insured upon the occurrence of an insured event provided for by the terms of the contract

Limit of insurance (limit of indemnity)

The sum insured specified in the insurance contract within which the insurer is liable to the policyholder (third parties)

Loss

Damage caused to the object of insurance as a result of an insured event and subject to compensation by the insurer

Loss mitigation (sue and labour)

The policyholder must in all cases act as if its property were uninsured and take all measures within its power to reduce or prevent the loss, even though the loss may be recoverable under the terms of insurance

Marine insurance

Protection of the property interests of participants in a maritime venture against risks related to the carrier's liability for obligations arising from harm caused to the life, health and property of a passenger, the carrier's liability in the carriage of dangerous goods, and liability for damage from oil pollution of the sea by ships (when carrying two thousand tonnes of oil or more). The scope of the insurer's liability, the relations between the parties before and after a loss, etc. are determined by legislative acts and the terms of the insurance contract.

Motor third party liability insurance

Civil liability insurance of vehicle owners is a set of classes of insurance providing for insurance payments as partial or full compensation of damage to a person's property interests related to that person's obligation to compensate damage caused to third parties through the use of a vehicle, including the carrier's civil liability

Movable property

Property not classed as real estate, including money and securities

Mutual insurance

A form of insurance in which each policyholder is a member of a mutual insurance society, i.e. a legal entity established in the legal form of a consumer cooperative for the purpose of mutually insuring the property interests of its members

Mutual insurance society

A legal entity established in the legal form of a consumer cooperative for the purpose of mutual insurance of the property interests of its members

Net rate (net premium rate)

The part of the gross rate intended to form the insurance company's resources for making insurance payments

Non-proportional reinsurance

A term of a reinsurance contract providing for the reinsurer's obligation to make a reinsurance payment within the amount fixed by the reinsurance contract if the amount of the insurance payment under the insurance contract concluded by the reinsured exceeds its own retention in respect of that payment

Object of insurance (subject matter insured)

Any property interests of individuals and legal entities, including those related to: 1) the survival of individuals to a certain age or term established by the insurance contract, death, or the occurrence of certain events in individuals' lives; 2) harm caused to the life and health of individuals as a result of accidents, other events or illnesses; 3) the possession, use and disposal of property; 4) the obligation to compensate harm caused to other persons, including as a result of a breach of contract (obligations).

Obligatory (treaty) reinsurance

An agreement between the reinsured (cedent) and the reinsurer under which the reinsurer becomes obliged to make a reinsurance payment upon the occurrence of insured events under contracts of a certain class of insurance (or contracts grouped by other criteria, such as similar property interests, policyholders or insured risks) to which the reinsurance cover applies, while the reinsured undertakes to pay the reinsurer the reinsurance premium due to it under all such insurance contracts and to perform other obligations stipulated by the agreement

Personal insurance

Insurance of life, health, ability to work and other property interests connected with the person of a citizen. Under a personal insurance contract, either the policyholder or another person named in the contract (the insured person) may be insured

Personal insurance contract

An insurance contract in which the subject matter of insurance is life, health, ability to work or other property interests connected with the person of a citizen. The subject matter of personal insurance may be any property interests of citizens and legal entities, including those connected with: 1) citizens surviving to a certain age or to a term set by the insurance contract, death, or the occurrence of certain events in citizens' lives; 2) harm to the life and health of citizens as a result of accidents and other events or illnesses; 3) possession, use and disposal of property; 4) the obligation to compensate for harm caused to other persons, including as a result of a breach of contract (obligations).

Premium

The sum of money that the policyholder must pay to the insurer for the latter's assumption of the obligation to make an insurance payment to the policyholder (beneficiary) in the amount determined by the insurance contract

Probability of an insured event

A quantitative assessment of the likelihood of occurrence of an insured event, for which insurance indemnity is paid, under particular classes of insurance. The probability of an insured event serves as the basis for setting insurance tariffs, rates and premiums, and the discounts and loadings applied to them.

Profit commission (tantième)

A form of reward paid by reinsurers to the reinsured (cedent) for the opportunity to participate in a reinsurance treaty. It is paid annually as a certain percentage of the net profit earned by the reinsurer from the reinsurance treaties in which it participates

Property insurance

Insurance of property and related property interests. In property insurance, the risk insured is the loss (destruction), shortage or damage of property and other property benefits and rights

Property insurance

A set of classes of insurance providing for insurance payments as partial or full compensation of damage to a person's property interests related to the possession, use and disposal of property, caused by its damage or destruction

Property insurance contract

An insurance contract in which the subject matter of insurance is property and related property interests. In property insurance, the risk insured is the loss (destruction), shortage or damage of property and other property benefits and rights: things, money (including foreign currency), financial instruments, works, services, objectified results of creative intellectual activity, trade names, trademarks and other means of individualisation of products, property rights and other property.

Proportional reinsurance

A condition of a reinsurance contract providing for the reinsurer's obligation to make a reinsurance payment equal to a percentage, set by the contract, of the insurance payment under the direct insurance contract concluded by the reinsured

Quotation

The premium rate at which an insurer is prepared to accept the relevant risk for insurance. Quotations may be obtained from several insurers in order to establish the most acceptable terms of insurance

Reduced sum insured (paid-up value)

The sum insured under a life insurance contract, reduced because the policyholder has stopped paying regular insurance premiums ahead of schedule. With the reduced sum insured, the contract remains in force until the end of the insurance term without further payment of premiums

Reinsurance

The activity and related relations arising in connection with the transfer by the reinsured of all or part of its insurance risks to reinsurance, on the one hand, and the acceptance of these risks by a reinsurance company, on the other hand, in accordance with the reinsurance contract concluded between them

Reinsurance contract

A contract under which one party (the reinsurer) undertakes, for a certain consideration (the reinsurance premium), to assume liability for a specified share of the risk of another party (the reinsured, or cedent). Proportional reinsurance is a term of a reinsurance contract providing for the reinsurer's obligation to make a reinsurance payment equal to a percentage, fixed by the contract, of the insurance payment under the direct insurance contract concluded by the reinsured

Reserve fund

A sum of money formed by the insurer, in accordance with the requirements of a regulatory legal act of the authorized body, from part of the insurance premiums received from policyholders for investment purposes and from the income (losses) from their investment, taking into account the insurer's expenses incurred in managing them

Retention (net retention)

The portion of the liability within which the insurer or the reinsured (cedent) bears responsibility for its own account under the insurance or reinsurance contract

Retrocession

The transfer by a reinsurer of part of a risk it has already assumed to other reinsurers

Risk

Contingencies or perils that are possible rather than inevitable and may cause losses; measured by the frequency and probability of a given level of loss. RISK OF ACCIDENTAL LOSS (of property) – the risk of possibly incurring losses due to the destruction of or damage to property for reasons beyond the control of the parties to the obligation (chance event, force majeure).

Risk loading (safety loading)

The part of the net rate that reflects the risk of random deviation from expected values

Robbery

An attack for the purpose of stealing another's property, combined with violence dangerous to the life or health of the person attacked, or with the threat of immediate use of such violence

Robbery (open theft)

Open theft of another person's property

Savings insurance (endowment insurance)

Savings insurance is insurance that provides for an insurance payment upon the occurrence of an insured event, including upon expiry of the period set by the insurance contract or another event provided for by the insurance contract, whichever occurs first. Savings insurance contracts may be concluded only in personal insurance

Subrogation

Unless otherwise provided by the property insurance contract, an insurer that has made an insurance payment acquires, within the amount paid, the right of claim that the policyholder (insured) has against the person liable for the losses compensated under the insurance. However, a contract term excluding the transfer to the insurer of the right of claim against a person who caused the losses intentionally is void

Surplus (excess)

A reinsurance system under which an insurance company cedes to reinsurance a portion of the risks it has accepted for insurance

Surrender value

The amount of money the policyholder is entitled to receive upon early termination of a savings (endowment) insurance contract

Surveyor

An employee of an insurance (reinsurance) company, or a legal entity providing services to an insurance (reinsurance) company under a contract for paid services, whose functions include the preliminary inspection and valuation of the object of insurance being accepted for insurance

Surveyor (average surveyor)

An expert and authorized representative of the insurer who, by agreement with the policyholder, establishes the cause, nature and amount of insured losses.

Temporary disability (temporary incapacity for work)

A temporary reduction in an employee's ability to perform his or her work (official) duties

Theft

Secret (covert) stealing of property

Trauma (injury)

Damage to the tissues of the human body, with disruption of their integrity and functions, caused by an external (mainly mechanical or thermal) impact

Types of insurance

An insurance product developed by an insurance company and provided to a policyholder within one or more classes of insurance by concluding an insurance contract

Unconditional deductible (deductible franchise)

Under an unconditional deductible, the loss is in all cases indemnified less the specified amount. The deductible is set either as a percentage of the sum insured or as a fixed amount.

Underwriter

An employee of an insurance (reinsurance) company whose functions include assessing the insurance risks accepted for cover and determining the terms and conditions of insurance (reinsurance) contracts

Unprofitability (loss-making)

The financial condition of an insurance company in which, over a certain period, cash inflows do not cover expenses, no profit is generated and debt increases

Urgent medical care

A form of medical care provided when diseases and conditions arise that require emergency medical care to prevent significant harm to health or to eliminate a threat to life

Vehicle taking without consent

Unlawful taking possession of a car or other vehicle without the intent to steal it

VMI

Voluntary medical insurance

Voluntary insurance

Insurance carried out by the will of the parties. The types, terms and procedure of voluntary insurance are determined by agreement of the parties.