Insurance Agencies, Brokers Industry Terminology

ACORD Forms

Standardized documents created by ACORD for insurance applications, certificates, loss notices, and policy changes, used to streamline data collection and carrier submissions.

-Have the client sign the ACORD 125 and 126 for the GL submission. -Issue an ACORD 25 COI listing the GC as additional insured.

Actual Cash Value (ACV)

A valuation method that pays the replacement cost of damaged property minus depreciation; commonly used in property claims unless Replacement Cost is specified.

-The carrier will settle on ACV, not RC. -After depreciation, the roof’s ACV came to $8,500.

Admitted Carrier

An insurer licensed by the state insurance department to write coverage, subject to state regulations and often backed by the state guaranty fund.

-We prefer admitted markets for this class. -If the carrier is admitted, the state guaranty fund may apply if they become insolvent.

Agency Bill

A billing method where the agency bills and collects the premium from the client and remits net of commission to the carrier.

-This policy is agency bill—invoice the insured and remit net to the carrier. -Switching to direct bill reduced our receivables.

Agency Management System (AMS)

Software used by agencies to manage clients, policies, downloads, accounting, documents, and workflows (e.g., Applied Epic, Vertafore AMS360, HawkSoft).

-We’ll download policy changes into Epic from the AMS. -Set up workflows in AMS360 to track renewals.

Aggregator/Cluster

A network of agencies that pools premium volume to gain market access, better commissions, and contingent/profit-sharing agreements.

-Joining a cluster gave us access to more carriers and profit share. -The aggregator takes a 2% override on written premium.

Appointment (Carrier Appointment)

Authorization by a carrier for a producer/agency to solicit and bind business on its behalf, often filed with the state DOI.

-You must be appointed with Travelers to bind coverage. -The life carrier allows just-in-time appointments on first submission.

Assigned Risk Pool (Residual Market)

State-administered insurance programs that provide coverage to risks unable to obtain it in the voluntary market (e.g., workers’ comp, auto).

-Place the new venture WC in the assigned risk plan. -The state auto residual market is the last resort for high-risk drivers.

Binder

Temporary evidence of insurance providing coverage until the policy is issued; states key terms such as limits, effective date, and insured.

-Issue a 30-day binder pending policy delivery. -The mortgagee needs a binder showing the new limits.

Binding Authority

The authority granted to an agent, broker, or MGA to commit the carrier to coverage, subject to defined limits and guidelines.

-Our MGA has binding authority up to $5M TIV. -Do not bind liquor liability without underwriter approval.

Book of Business

The entire portfolio of policies/accounts an agency or producer manages, often valued for M&A and used to gauge retention and growth.

-Our P&C book is $8M in annual premium. -The buyer offered 2x revenue for the personal lines book.

BOP (Businessowners Policy)

A standardized package policy for small to mid-sized businesses that typically combines property, general liability, and business income coverages.

-This bakery fits a BOP nicely. -The BOP bundles property, GL, and business income.

BOR (Broker of Record) Letter

A client-signed letter that authorizes a new broker/agent to represent the insured with the carrier and receive commissions on the existing policy.

-We won the account via a BOR mid-term. -Get a BOR to take over servicing from the incumbent broker.

Business Interruption (BI)

Coverage for lost income and extra expenses when a covered property loss disrupts operations; also called business income coverage.

-What’s your BI limit and period of restoration? -We added civil authority coverage to BI.

Captive Agent

An agent who represents and sells policies for a single carrier or affiliated group, as opposed to independent agents who access multiple carriers.

-She’s a captive agent with State Farm. -Independent agencies often compete with captive carriers.

Carrier

The insurance company that underwrites and issues policies and pays covered claims (also called insurer or company).

-Which carrier is offering the best terms? -We’ll remarket to three carriers at renewal.

Certificate of Insurance (COI)

A document, often an ACORD 25, that evidences coverage, limits, and dates to third parties; does not grant rights or change coverage.

-The landlord needs a COI with additional insured status. -Remind them a certificate doesn’t alter policy terms.

Claims-Made Form

A liability policy form that responds to claims first made during the policy period (and not necessarily when the act occurred), subject to the retroactive date and reporting requirements.

-Switching to claims-made lowers year-one premium. -Mind the retro date and consider tail coverage.

Coinsurance Clause

A property policy condition requiring the insured to carry a specified percentage of the property’s value; failure to do so reduces claim payments proportionally.

-An 80% coinsurance clause applies to the building. -Underinsurance could trigger a coinsurance penalty.

Commission

Compensation paid by carriers to agents/brokers, typically a percentage of premium, for placing and servicing policies.

-Base commission is 15% new, 12% renewal. -Some jurisdictions require commission disclosure.

Contingent Commission

Additional compensation paid by carriers based on profitability, growth, retention, or volume of an agency’s book (also called profit share or overrides).

-We hit our contingent with a 45% loss ratio. -The network distributes contingent commissions annually.

Cyber Liability Insurance

Coverage addressing cyber risks such as data breaches, network security failures, ransomware, business interruption, and privacy liability; includes first-party and third-party components.

-Quote $1M cyber with social engineering. -The vendor contract requires cyber coverage.

Declarations Page (Dec Page)

The policy summary pages detailing key information such as insureds, coverages, limits, deductibles, forms, and effective dates.

-Send the dec page to confirm limits and forms. -The dec lists the named insured, locations, and endorsements.

Deductible

The amount the insured must pay before the policy responds; may be per occurrence, per claim, or aggregate, and differs from a self-insured retention.

-There’s a $1,000 deductible per occurrence. -A higher deductible can reduce the premium.

Direct Bill

A billing arrangement where the carrier bills and collects premium directly from the insured, paying the agency its commission separately.

-The carrier will invoice the insured—it’s direct bill. -Direct bill reduces agency accounts receivable.

Endorsement

A document that modifies the terms, coverages, limits, or conditions of an existing policy; can add, limit, or exclude coverage.

-Add additional insured by endorsement. -We endorsed the policy to increase the building limit.

Errors and Omissions (E&O) Insurance

Professional liability insurance for agents and brokers (and other professionals) protecting against claims of negligence, errors, or omissions in providing services.

-Our agency’s E&O renews in March. -The E&O claim alleged failure to procure coverage.

Excess and Surplus Lines (E&S)

Insurance provided by nonadmitted insurers for unique or higher-risk exposures that the admitted market will not write; subject to surplus lines compliance rules.

-Place this vacant property in E&S. -Don’t forget surplus lines taxes and stamping fees.

Experience Modification Factor (E-Mod/X-Mod)

A factor applied to workers’ compensation premium based on the employer’s historical losses versus expected losses; below 1.00 is a credit, above 1.00 is a debit.

-Your E-Mod is 0.82, which is a credit. -Losses this year affect your mod two policy years ahead.

Exposure

The measure of risk subject to loss used for rating (e.g., payroll, sales, number of units, total insured value, number of autos).

-GL exposure is gross receipts; WC exposure is payroll. -We need TIV to rate the property exposure.

Extended Reporting Period (ERP)

A coverage extension allowing claims to be reported after a claims-made policy ends for wrongful acts that occurred before the policy expiration (also called tail coverage).

-Buy a one-year ERP when canceling the claims-made policy. -The ERP covers late-reported claims, not new acts.

First Notice of Loss (FNOL)

The initial report of a claim by the insured or agent to the carrier, triggering claim setup and investigation.

-Submit FNOL within 24 hours of the incident. -The app lets insureds file FNOL with photos.

General Liability (GL)

Commercial General Liability covers third-party bodily injury, property damage, and personal/advertising injury arising from premises, operations, products, and completed work.

-The lease requires $1M/$2M GL limits. -Does the GL include products-completed operations?

Guaranteed Cost Policy

A policy where the premium is fixed and not adjusted based on the insured’s actual losses, unlike loss-sensitive programs (e.g., large deductible, retro-rated).

-WC is guaranteed cost—no retrospective adjustments. -Losses won’t change the premium mid-term.

Hard Market

A phase of the insurance cycle characterized by reduced capacity, stricter underwriting, higher rates, and limited appetite; opposite of a soft market.

-Property CAT is in a hard market. -Expect tighter underwriting and rate increases.

HO Forms (HO-3, HO-5)

Standard homeowners policy forms; HO-3 is special form for dwelling with named-peril personal property, while HO-5 provides broader open-perils coverage for both.

-They upgraded from HO-3 to HO-5 for broader personal property coverage. -The HO-3 excludes certain perils that HO-5 includes.

Indemnity

The principle of restoring the insured to the financial position prior to a covered loss, without allowing a gain.

-Insurance is a contract of indemnity—no profit from a loss. -The indemnity clause in the lease shifts risk to the tenant.

Insurance Services Office (ISO)

An organization that develops advisory policy forms, rating plans, and statistical services used by many P&C insurers in the U.S.

-We’re using ISO CG 00 01 for GL. -The carrier filed ISO rates with a deviation.

Insurance to Value (ITV)

The adequacy of a property limit relative to its true replacement cost; proper ITV helps avoid coinsurance penalties and underinsurance.

-The building is insured to only 70% ITV. -Poor ITV can trigger coinsurance penalties.

Managing General Agent (MGA)

A specialized intermediary granted delegated underwriting authority by carriers to quote, bind, issue policies, and sometimes handle claims.

-We access that market via an MGA. -The MGA can bind and issue on the carrier’s paper.

Minimum Earned Premium

The minimum portion of premium the carrier keeps regardless of policy cancellation date, often expressed as a percentage of the total premium.

-There’s a 25% minimum earned premium on this policy. -Even if they cancel early, the MEP is nonrefundable.

Monoline Policy

A policy that covers a single line of insurance (e.g., GL only), as opposed to a package policy combining multiple lines.

-We wrote monoline GL without property. -Package pricing beat the monoline option.

Motor Vehicle Report (MVR)

A driving record from the state DMV used to underwrite and rate auto risks; shows violations, accidents, and license status.

-Order MVRs for all drivers before binding. -Two major violations on the MVR spiked the auto premium.

Named Insured

The person or entity designated in the policy declarations as the primary insured; may have special rights (e.g., first named insured).

-Ensure the LLC is the named insured, not the owner personally. -Add the subsidiary as an additional named insured.

Nonadmitted Carrier

An insurer not licensed in the state but eligible to write through surplus lines; policies are subject to surplus lines taxes and regulations, not guaranty funds.

-We placed it with a nonadmitted surplus lines carrier. -There’s no guaranty fund protection if the nonadmitted carrier fails.

Occurrence Form

A liability policy form that responds to losses that occur during the policy period, regardless of when the claim is made.

-GL is written on an occurrence form. -Losses occurring during the term are covered even if reported later.

Premium Finance Agreement

A loan arrangement where a finance company pays the carrier upfront and the insured repays over time, with the finance company holding cancellation rights.

-They financed 80% of the premium at 12% APR. -Missed payments can trigger cancellation by the PFA.

Producer

A licensed agent or broker who solicits, negotiates, and places insurance on behalf of clients and carriers.

-Assign a producer and an account manager to the prospect. -Producers must maintain CE credits and carrier appointments.

Property and Casualty (P&C)

A major segment of insurance covering property (buildings, contents) and liability exposures (GL, auto, WC), distinct from life/health.

-Our agency focuses on P&C, not life and benefits. -P&C new business grew 12% YOY.

Workers' Compensation

Statutory insurance providing medical and wage benefits to employees for work-related injuries or illnesses, rated by payroll and class codes, often modified by the experience mod.

-Your class code is 5437 and WC is mandatory in your state. -Improve safety to lower your E-Mod and WC premium.