GLOSSARY OF TERMS – A to J

 

GLOSSARY OF TERMS – A to J

·         ADDITIONAL EXPENSES-STRIKES

If the destination port is strike-bound at the time of arrival of the ship carrying cargo meant for that port, the shipowner may exercise his liberty granted by the contract of affreightment and discharge the cargo at the nearest alternate port and absolve himself of any further responsibility to the cargo. In such circumstances, the cargo owner may have to incur additional expenses in reforwarding the cargo from that port to the intended port of discharge. The ordinary cargo policy does not cover these expenses. If the cargo owner wishes to protect his interest against such eventuality, he has to avail an "additional expenses (strikes) cover" extension for all his shipments that may be effected during a period of 12 months. This extension will not be available for shipments if cover is sought when the strike has commenced in the particular area.

·         AD VALOREM

In proportion to the value.

1. Insurance premium in respect all property insurance coverage is fixed mostly in relation to the insured value of the property.

2. Calculation of stamp duty on certain portfolio is related insured value under the policy Ex. Marine Cargo and Personal Accident Insurances.

·         ACTUARY

An expert in statistics and a mathematician in the insurance field. Conducts extensive statistical studies. Calculates insurance risks and premiums and reserves. Involves in the preparation of various annual reports in compliance of regulatory requirements.

·         ACTUARIAL SCIENCE

A branch of knowledge which deals with mathematics of insurance. It is used in the evaluation of various risks, premium fixation commensurate with the risks and also provisions relating to unexpired risks and unexpired liabilities.

·         ACTUARIAL ASSESSMENT OF EMPLOYEES

The employees of a company may be entitled to various benefits by way of terminal dues at the time of retirement or resignation from the company. Eg; Gratuity for those who have completed 5 years of service, encashment of accrued leave at the time of retirement, commutation of pensionary benefits etc. Even though these liabilities arise at the time of retirement only, the employer is expected to evaluate such future liabilities by way of actuarial valuation and provide for the same in the current years accounts. Such provisions are called actuarial Assessment of employees liabilities.

·         ACTUAL TOTAL LOSS

An actual total loss of a property is said to take place when
1. The insured is irretrievably deprived of the subject matter insured
2. The subject matter is so damaged by an insured peril as to cease to be a thing of its kind-loss of specie.
3. In so far as it relates to a vessel and/or cargo thereon, the vessel is declared as missing.

·         ACT ONLY POLICY

Insurance Coverage for all motor vehicles to indemnify the insured upto the limits prescribed in the Motor Vehicle Act, 1988 in respect of his legal liability to pay compensation for death or bodily injury to any third party or damage to the property of any third party caused in any accident or series of accidents arising out of one event in so far as is necessary to meet the requirements of section 147 of the Motor Vehicle Act, 1988.

·         ACT OF GOD PERILS

Any event not caused or contributed to by man. Some sudden and irresistible acts of nature that could not reasonably have been foreseen or prevented, such as floods or exceptionally high tides, storms, lightning, earthquakes etc. constitute Act of God Perils.

·         ACT LIABILITY WITH FIRE &/OR THEFT

Provision under the Motor Insurance Tariff to cover a motor vehicle against act liability of the insured together with restricted own damage to the vehicle caused by fire, external explosion, self-ignition or lightning or burglary, house breaking or theft. There is a percentage reduction from the premium applicable for the own damage portion of the cover in view of the above-restricted scope of the cover, which is provided in the tariff.

·         ACT IN FORCE CLAUSE

A clause included in Excess of Loss Treaties pertaining to Liability Insurance, where such liability is statutory, to take care of changes in law or act about quantum of compensation during the cover period, by revision of rate and/or underlying loss retention as well as the limit of the excess of loss cover.

·         ACQUISITION COSTS

This refers to the expenses incurred by the Direct Insurer for acquiring Direct Premium. Normally commission expenses come under this category. Even brokerage paid if any and also initial publicity expenses for product launches can be considered as acquisition costs.

·         ACQUISITION COST FACTOR

Acquisition cost incurred by the direct insurer towards procuring business, which is taken into account by the reinsurer while fixing the reinsurance commission for the reinsurance offered.

·         ACQUIRED IMMUNO DEFICIENCY SYNDROME (AIDS)

Condition characterized by illness indicative of reduced immune responsiveness in otherwise healthy individuals. The Standard Mediclaim Insurance Policy does not extend cover for AIDS.

·         ACCUMULATED STOCKS CLAUSE

As per a clause in Fire, Consequential Loss Policy, the insured, as part of their business policy, may maintain stock of finished goods. Such an accumulated stock may be utilised during the period of interruption caused by a damage to meet the demand. Consequently, during the indemnity period it would appear that there was no reduction in turnover, even though the manufacturing activities are stopped. In turn, there may not be any claim in respect of loss of gross profit.

The accumulated stock clause provides that in adjusting any identifiable loss under a consequential loss policy, account shall be taken and allowance made if any shortage in turnover is avoided by reason of the turnover being maintained from the accumulated stocks.

·         ACCOUNT-PROFIT & LOSS

This is also a part of the final accounts in which the general income and expenditure pertaining to shareholders funds is accounted apart from transfer of net underwriting profit or loss from each revenue account. The format of this account is prescribed by the IRDA regulations. This account is prepared for annual transactions of a year and is intended to show the net profit or loss of the company for a year.

·         ACCOUNTING STANDARDS

The Institute of Chartered Accountants of India has prescribed certain standards to be followed while accounting certain types of transactions so that uniform interpretation of accounts of  various companies is possible. These standards are prescribed in consonance with similar international standards practiced world over. Most of the standards are to be mandatorily followed by the companies in preparation of their accounts. IRDA Regulations also prescribe that it is mandatory for insurance companies to follow the prescribed accounting standards which are approximately 22 in number as of now . Only the accounting standards in respect of investment income are not applicable to insurance companies.

·         ACCOUNTING POLICY

As there are different methods of accounting,especially for specific items in the insurance companies, the company is expected to explain the method of its accounting by its accounting policy, which will be attached to the annual accounts.

·         ACCOUNTING- MERCANTILE SYSTEM

Basis of accounting by a company where,in addition to the money received or paid,outstanding incomes as well as expenses are recognized.

·         ACCOUNTING- CASH SYSTEM

Basis of accounting by a company where all accounting is done only if money is either received or paid and so no dues are recognized.

·         ACCOUNT- REVENUE

This is the prescribed form, in which the final account is to be drawn for each department of premium underwritten by the insurer. The format is prescribed by IRDA Regulations. Thus, there is a separate revenue account for Fire Department, Marine Dept. and Misc. Dept. Such revenue accounts enable the underwriter to assess the underwriting profit generated by a particular department premium.

·         ACCOUNT- PROFIT & LOSS APPROPRIATION

The format of this account is also prescribed by the IRDA Regulations. This is prepared annually at the end of the year. This shows the appropriations made out of the net profit earned during the year. The appropriations can be dividends, transfer of general reserve or dividend equalization etc. The final balance in the Profit & Loss Appropriation Account is shown in the liabilities side of the balance sheet.

·         ACCOMMODATION LINE

Acceptance by a reinsurer, as a special consideration, of a small accommodation line on a reinsurance treaty or a facultative offer. This situation would arise where a reinsurer might have shares on many profitable treaties from a company and the said company might request the reinsurer for some supporting share on a treaty with unsatisfactory results.

·         ACCIDENTAL MEANS

Purely by circumstances which are wholly unexpected, unforeseen and beyond the control of the insured/beneficiary under the policy.

·         ACCIDENT SEVERITY

A measurement of the seriousness of accidents occurring within a given period, judged either by their cost or by the nature of the damage or injury to which they give rise.

·         ACCIDENT INSURANCE

Coverage for death or bodily injury resulting from accidental means. Cover will extend benefits for different consequences of accident, namely, death, Total disablement of either permanent or partial nature as also partial disablement of permanent nature. Cover can also provide for reimbursement of medical expenses towards treatment of accidental injury on payment of extra premium.

·         ACCIDENT FREQUENCY

A measurement of number of accidents occurring in a given period.

·         ACCIDENT AND SICKNESS INSURANCE

Term used to denote a personal accident insurance policy, which is extended to cover sickness benefits also. However benefits relating to sickness extension will be restricted to weekly compensation for temporary total disablement and for reimbursement of medical expenses towards treatment in a hospital or a nursing home for all sickness other than those which are excluded. The cover will be subject to a period exclusion and a maximum period limit in respect of any one sickness A policy like this which was in existence in the Indian Market was discontinued after nationalization of general insurance. It is possible that in the current scenario some companies introduce a similar insurance cover with the approval of the regulatory authority. (See also "Accident Insurance").

·         ACCIDENT

An unlooked for mishap or an untoward event which is not expected or designed.

·         ACCESSORY

The term generally refers to those parts which are directly supplied by the manufacturer along with the equipment /vehicle but which are not essential for the operation/running of the equipment/vehicle.

·         ACCESS TO THE RECORDS CLAUSE

The term, also called the Inspection of Records Clause, refers to the right of the reinsure to inspect any books or records of the Reinsured Company, at the expense of the former.

·         ACCEPTANCE

Agreement to an offer, thereby leading towards conclusion of a contract. One of the fundamental requirements of any contract of sale. Applicable to Contracts of Insurance also.

·         ABANDONMENT

In Marine Cargo and Marine Hull Insurance, 'Abandonment' is a condition precedent to a constructive total loss of the property insured. The insured must inform the insurer of his intention to abandon the property before doing so. But the insurer is under no obligation to accept the abandonment.

·         A.O.Y

Any one year. The term refers to the maximum liability of the insurer under the policy for all claims preferred during the policy period.

·         A.O.V.

Any one vessel. The term, which relates to Marine Cargo Insurance, refers to the insurer's maximum commitment under the policy for all cargo in respect of any one vessel.

·         A.O.A.

Any one accident. The term, in relation to liability insurance, refers to the maximum liability of the insurer in respect of all claims, both for bodily injury and property damages of third parties arising out of any one accident.

·         AS IS WHERE IS

Commercial term that buyer shall accept delivery of goods at the same place where it lies and in the same condition as it exists at the time of inspection prior to purchase. In General Insurance this term is used mostly relating to salvage disposal transactions.

 

·         BASIS OF VALUATION CLAUSE

Provision describing the method of calculating the value of cargo for the purpose of declaration under marine cargo insurance open covers and open policies.
Provision appearing in the conditions relating to the fire declaration policies for stocks, dealing with the valuation of stocks for periodical declaration purposes.

·         BASIS OF LOSS SETTLEMENT

A separate section inserted in all the policies spelling out the basis of settlement of different types of claims under the policy.

·         BASIC RATE

The rate of premium shown in the rate guide or manual of the insurance company for a specific insurance cover.

·         BASIC PREMIUM

The Gross Premium charged by the insurer to the insured under a policy.

·         BASIC COMMISSION

The commission on a reinsurance proportional treaty which is always applied on the written premium of the treaty.

·         BASE PREMIUM

Premium charged by the direct insurer on the policy.

·         BARRATRY

Wrongful act willfully committed by the master or crew to the prejudice of the owner or the charterer of the vessel. Deliberate running aground, setting on fire and scuttling of the ship by the crew are instances of barratry. Loss or damage arising from barratry of the ship is covered under ITC-Hulls and ICC (A) clauses.

·         BARGES

Smaller size vessels for carriage of cargo from port to port-most of them used for carrying bulk cargo-some used for carriage from shore to ship. They are either dumb or power driven. They have the risk of capsizing during inclement weather.

·         BAREBOAT CHARTER

Form of time charter where the charterer hires the vessel and meets all expenses incurred during the period of the charter.

·         BAR CHART

A form of graphical presentation of data to highlight the main features of a frequency distribution of different kinds of risks and their consequences.

·         BANKERS INDEMNITY POLICY

A specially designed insurance policy for the banks. Main Coverage is against

o    Loss/destruction of money and/or securities because of fire, riot and strike terrorism, burglary, whether in the premises or outside, caused by either employees or other persons

o    Money and/or securities, whilst in transit, lost, stolen, misappropriated or made away with, either due to negligence, or fraud of the employees of others

o    Forgery or alteration committed by employees and outsiders, resulting in financial loss to the bank

o    Loss of money or goods held in trust by reason of dishonesty or criminal act of the employees

·         BANK TRANSFERS

When funds are transferred from one bank account to another the same has to be recorded in the books of account. This is done by way of bank transfer journal entry.

·         BANK RECONCILIATION

Normally the bank account as per the books of the company and as per the bank should show the same balance. But there could be cases where cheques are deposited by the company, for which the company has increased its bank account balance but the same are not yet cleared in the clearing and hence the bank will show a lesser balance. Therefore the company has to prepare a statement showing how the balance between the company's accounts and as per the bank differs and what are the reasons for the same. Such a statement reconciling the bank balance as per company's books with that of the bank, is called Bank Reconciliation Statement.

·         BANK GUARANTEE

In relation to insurance, guarantee executed by a bank in favor of an insurer, guaranteeing payment of premium by the insured in relation to certain policy/policies, within the period stipulated in the guarantee. In India as per the provisions of the Insurance Act and the rules there under premium shall be physically paid to the insurer in almost all cases on or before the commencement of cover. The act and the rules provide that only in cases where the premium is not ascertainable at the time of commencement of cover a bank guarantee shall be accepted by the insurer.

·         BANK CHARGES

The banker levies certain charges for some operations in the bank account like realizing outstation cheques, for effecting a bank to bank transfer, for returning the dishonored cheques etc. Such levies are accounted as bank charges in the books of account of the company by passing journal entries.

·         BANK BALANCE AS PER BOOKS AND AS PER BANK

As the company is entering all its bank transactions in its bank account in the ledger, the bank will also be maintaining a ledger account to record all the transactions pertaining to the company which will be reflected in the pass book and will also show the balance as per bank at any point of time. So the bank account will show balance as per the company's accounts and also as per the books of the bank.

·         BALLAST

Material carried in vessel to ensure stability when the vessel is without any cargo.

·         BAILOR

The person who transfers his property to the temporary care, control and custody of another, while retaining the ownership with him.

·         BAILMENT

Contract concerning transfer of property from bailor to a bailee.

·         BAILEE

A person who has legal possession of goods belonging to others and is supposed to take such care of goods as the owner would take. He has the insurable interest in such goods and can insure the same in his name.

·         BAGGED CARGO WARRANTY

Marine cargo insurance policies normally exclude loss of contents from bags through seams and also natural loss in weight of cargo. In order that this issue is successfully addressed the insurers put a warranty in the policy to the effect that shortage in damaged bags will be reckoned by a comparison of the weight of similar number of bags of the same lot arriving sound at destination and policy will exclude shortage from sound bags.

·         BAGGAGE INSURANCE

Insurance policy providing cover against loss of or damage to accompanied personal baggage of the insured or insured's family member(s) due to fire, theft or any accident during the course of journey including stoppage enroute, anywhere in India. The policy normally excludes routine travels like going to and returning from office, theft from unattended vehicle, articles worn on the body of the person, war etc. It is possible that the policy is modified to suit the exact needs of the proposer subject to mutual consent and the insurer following the procedure of "file and use" laid down by the Regulatory Authority.

·         BAD DEBTS

A debt which is impossible to be collected and consequently has become worthless to the creditor.

·         BACK-UP XL COVERS

Sometimes it is possible that XL Cover expires before its natural expiry date due to one reinstatement provision exhausting the cover limits by two total losses. Back-Up XL Covers are arranged as additional reinstatement covers for the remaining period.

·         BACKLOG

In insurance, extent of unattended proposals, enquiries or other references, un-issued policies/documents and indisposed claims preferred on policies.

·         BACK OFFICE

Immediate controlling office, which does not directly transact business, but monitors and controls the marketing offices. Its main functions include looking to accounting records, ensure compliance by the marketing offices of the government regulations, company directives, guidelines etc. and also hold communication with marketing offices on all matters concerning the requirements of both sides.

·         B/L - BILL OF LADING

Bill of Lading. A bill of lading is a receipt signed on behalf of the ocean carrier, indicating in what apparent order and condition the goods have been received on board. It is not necessarily the complete contract of carriage of goods but is usually the best evidence of the contract. It is also a document of title and thus a document of transfer.

·         BALANCES-REINSURANCE COMPANY

The direct insurer will be having transactions with the reinsurance companies either on treaty basis or facultative basis, which will involve premium cessions as well as claim recoveries. This will also have reinsurance commission transactions. All the balances in the reinsurance accounts are grouped under the reinsurance company balances and shown on the assets side or liability side of the balance sheet, depending on the nature of balance.

·         BALANCES- RECONCILED

Various account balances at the end of the year are made up of different accounting entries and each entry in each account should be reconciled with the corresponding entry in which case, every item in the account balance at the end of the year can be explained. When such a detailed analysis of the transactions is done, the balances are said to be reconciled. Otherwise they are treated as non-reconciled balance.

·         BALANCES- INTER BRANCH/ OFFICE

If the insurance company has large number of branches for its operations, there could be many transactions between the head office of the company and its branches and also between the branches. The balances in these branch accounts are grouped under Inter Branch Account Balances and shown in the balance sheet.

·         BALANCES- CONFIRMED

The balances in the account of the insurance company may arise out of the transactions with outside parties who have to confirm their balances so as to certify the correctness of the accounts. For instance, a Bank A/c. shown with balance as per the account has to be confirmed by the banker. Similarly, an amount shown as due from outsider has to be confirmed as due from outsider. Confirmed balances add to the correctness of the balance.

·         BALANCES- COINSURANCE

There are certain risks, which are shared between the direct insurers at the instance of the insured. These are of coinsurance transactions. Here the lead insurer collects the 100% of the premium and in turn pass on the respective share of the premium to the co-insurance companies. In the case of claims also, the lead insurer pays 100% of the claim and collects the co-insurers share of claim later. Such transactions are routed through the co-insurance company's account codes and the balances in these accounts are reflected in the assets side or liability side of the balance sheet, depending on the nature of balance.

·         BALANCES- AGING OF

The account balance of any account will comprise of accounting entries over the entire period and finally at the end of the year, the balances may arise either out of last few transactions or out of the first few transactions. Hence, it is necessary to identify as to how long these transactions are outstanding in the books of accounts. For instance, a debtor's balance can arise out of the last few months balances or out of first few months balances. In the latter case, it may look that they are outstanding for almost a year. Hence, steps should be taken for recovery. Such meaningful analysis can be done only when the year end balances are classified according to the age of the transaction.

·         BALANCES- AGENTS

As the business of insurance is mostly procured through agents and all the premium transactions are accounted agent wise to arrive at dues from/dues to agents at the end of the year. As the number of transactions will be more, they are maintained separately for premium transactions and commission transactions. All the debit balances at the end of the year are added and shown in the assets side and the credit balances on the liability side of the balances sheet.

·         BALANCE SHEET RESERVES

Amount expressed as a liability on the insurance company's balance sheet for benefits owed to policyholders. These reserves must be maintained according to the provisions of the insurance act, regulations of the Insurance Regulatory and Development Authority and also as per the actuarial formulas. These reserves serve to guarantee that all benefit payments for which the insurance company has received premiums will be made.

·         BALANCE SHEET

Accounting statement showing the financial condition of a company at a particular date. Listed on the statement are the company's assets,liabilities,capital ,surplus.
Balance sheet is a snapshot of the values of assets and liabilities of the Company on a particular date. Drawing a balance sheet, as per the format prescribed under the IRDA Regulations, as on the last date of the financial year, is mandatory. However, such balance sheet can be prepared on any day. The balance sheet lists out the value of all assets to the company as against the various liabilities to the company and both the values should be equal on any particular day.

·         BALANCE AS PER CONTRA

There could be certain transactions wherein the insurance companies invest the funds and create investments on behalf of a particular fund and hence the assets cannot be treated as the assets of the insurance company. Such investments are shown on the assets side along with the wordings as per contra which means similar balance will appear in the liabilities side which represents the fund for the balances for which the investments are made. eg. investments made in respect of Environment Relief Fund.

 

·         CARRIERS' LEGAL LIABILITY INSURANCE

Policy intended to cover the legal liability of the transport carrier for loss or damage to goods entrusted to him for transport from one place to another. As the title of the policy implies, it does not cover any contractual liability assumed by the carrier. Insurer's, for underwriting considerations, tend to limit the coverage only in respect of loss or damage to goods arising out of a fire or any other accident to the carrying vehicle and also insist that the carrying vehicle should also be covered comprehensively under motor insurance.

·         CARRIER'S ACT, 1865– NOTICE OF LOSS

As per Section 10 of the Act no suit shall be instituted against a common carrier of the loss/damage to goods, unless notice in writing has been given within six months from when the loss/damage first came to the knowledge of the goods owner or his agent.

·         CARRIER

Shipowner, airlines, railways, road carriers or any other person or organisation who carry goods for transport.

·         CARRIAGE BY AIR ACT, 1972

This act gives effect to the provisions of the Warsaw Convention, 1929 and the Hague protocol, 1955 relating to international carriage of passengers and goods by air.
The act defines the liability of the air carriers for death or injury to passengers and for loss of or damage to registered luggage and cargo. It also mentions the time limits within which claim notice is to be served and suit to be filed against the air carrier.

·         CARRIAGE BY AIR ACT, 1972– TIME LIMIT FOR SUIT

As per Section 29 of the Act, the right of recovery for loss or damage shall be extinguished if an action against the carrier is not brought within two years reckoned from the date of arrival of the aircraft at destination or the date on which it ought to have arrived.

·         CARRIAGE BY AIR ACT, 1972– LIMITATION OF LIABILITY

As per Section 22 of the Act, for registered luggage and goods the liability of the carrier is limited to 250 francs per kilogram unless the actual value of the goods were declared to the carrier by the goods owner when the goods were handed over for carriage.

·         CARRIAGE BY AIR ACT, 1972– LIABILITY OF AIR CARRIER

As per Section 18 of the Act, the carrier is liable for damage sustained in the event of the destruction or loss of, or damage to, any registered luggage or any goods, if the occurrence which caused the damage so sustained took place during the carriage by air. The term carriage includes the period during which the luggage or goods are in charge of the carrier, whether in an aerodrome or on board an aircraft.

·         CARRIAGE BY AIR ACT, 1972– DEFENCE OF CARRIER

As per Section 20 of the Act, the carrier is not liable if he proves that he and his agents have taken all necessary measures to avoid the damage or that it was impossible for him or them to take such measures. The carrier is also not liable if he proves that the damage was occasioned by negligent pilotage or negligence in the handling of aircraft.

·         CARRIAGE BY AIR ACT, 1972 – CLAIM ON AIR CARRIER

As per Section 26 of the Act, in case of loss or damage to luggage complaint should be lodged with the carrier within three days of discovery of such loss/damage and in case of goods the period for reporting is within seven days. Failure on the part of the owner or the person entitled to delivery shall result in no action lying against the carrier.

·         CARGO THEFTS (MARITIME FRAUDS)

One of the major causes of maritime frauds. These are caused by the owners of the ships who are paper companies, deviating the route, after taking the cargo on board and discharging them into a port of convenience, by using falsely registered vessels. Thefts are also caused by the collusion between the shipper and the consignee by tampering of the cargo either on board the vessel or at the terminal point at destination port and stealing the cargo and later putting a claim on consignee's insurer.

·         CARGO PLAN

Plan depicting space in a ship occupied by cargo.

·         CARGO INSURANCE

Insurance of all types of goods and merchandise in transportation by sea, air, rail or Road Transport where such goods or merchandise are transported under Contract of Affreightment.

·         CARBOY

Glass containers protected by basket work for liquid cargo shipments, particularly acids.

·         CAPTIVE INSURANCE COMPANY

A company formed solely to insure the risks of its own parent company and all units coming within the group, with the primary objective of
a) providing the specific insurance covers for the group 
b) achieving reduction in cost and also save on the tax angle 
c) securing best of terms from the international market and 
d) directly obtaining investment return on its invested capital

·         CAPTAIN'S PROTEST

When the ship encounters heavy weather or any other accident or that the cargo suffers some accidental damages captain of the ship signs a declaration giving details of the accident and damage. This he does mainly to avoid any claim that may be lodged at a later date against the ship management for negligence. This declaration is called captains Protest. This document is requisitioned by the insurer in case of a claim for heavy weather damage to the insured cargo.

·         CAPITAL SUM INSURED

The term used in Personal accident insurance Policies to denote the sum payable under the policy for death or loss of two limbs or two eyes or for other permanent total disablement. Insurer normally tends to limit this sum with regard to individual persons based on the earning capacity of such persons in order that the persons do not over insure for their advantage.

·         CAPITAL SHARE

Out of the authorized capital the company may choose to issue shares only to some extent. The portion for which shares are issued and allotted is called the issued capital. Out of the issued capital also the company may collect the entire amount of the shares in one or two stages which are called calls. So the amount, which the shareholders have been called to pay is called the called up capital. Out of the called up amount also some shareholders might not have paid the amount due and hence the amount, which is actually paid by the shareholders is called the paid up capital of the company. In normal parlance the capital of a company will refer to the paid up capital only.

·         CAPITAL- PAID UP

This represents the maximum amount upto which the company can raise capital by way of issue of various types of shares. This amount is fixed while incorporating the company and can be changed by following the procedure prescribed in the companies Act.

·         CAPITAL- AUTHORIZED

This represents the shareholders contribution towards the capital of the company.

·         CAPACITY OF THE PARTIES TO CONTRACT

One of the essential elements for a contract to be legally valid. Applicable to insurance contracts also. Every person should be major by age, of sound mind and not disqualified by any law to which he is subject in order that he is considered competent to contract. Insurer also must have legal capacity to contract.

·         CAPACITY

1.     The amount of capital available to an insurance company for underwriting general insurance coverage or coverage for specific perils.

2.     The amount of insurance a company is able to write, due to limitations on or availability of capital.

·         CAP A WELL

The term used to control a blowout by placing a very strong valve on the wellhead.

·         CANCELLATION RETURNS ONLY

Refund by the Marine Hull Insurers of pro-rata monthly premium for each uncommenced month of the policy when the policy is cancelled before the normal expiry date by mutual agreement between the insured and the insurer.

·         CANCELLATION OF TREATY

A clause in the treaty reinsurance wording which outlines the procedure for termination of the obligations under the treaty by both the cedent and the reinsurer.

·         CANCELLATION OF INSURANCE-MOTOR

A policy can be cancelled only after ensuring that the vehicle is insured elsewhere and the original Certificate of Insurance of the policy that is cancelled is surrendered.
Insurer should inform the Regional Transport Authority by registered A.D. about the cancellation of the insurance.

·         CANCELLATION CLAUSE

The clause appears in most of the period policies. This gives the privilege to both the insurer and the insured to cancel the policy if they don't want the same to continue until the normal date of expiry. The conditions of cancellation differ among different policies. The exact provision in respect of a particular policy will be found incorporated in the policy.

·         CANCELLATION

The discontinuance of an insurance policy before its normal expiry date stipulated in the policy.

·         CALL OPTION/ PUT OPTION

These terms are used to refer to the right of the investor or borrower to terminate the borrowing program. For instance, in the case of a 7 year debenture with call and put option at the end of 3 years, the borrower has an option to repay the money raised by the debentures or the lender has an option to call for the redemption at the end of 3 years, instead of waiting for 7 years. When the option is exercised by the borrower it is called call option and when the option is exercised by the lender it is called as put option. The instruments can be designed to have either call option only or put option only or both options.

·         CALENDAR YEAR EXPERIENCE

Business results during a calendar year analysed and experience studied on a calendar year basis.

·         CAKING

Commodities like sugar, flour or cement tend to get caked because of water absorption from the air. Marine Cargo Insurance Policies for such cargo, providing even widest coverage normally exclude caking risk, unless caused by a direct contact with water.

·         C.K.D.

Consignments in a completely knocked down condition which are assembled at destination to be made into whole units.

·         C.I.P.

Consignments in a completely knocked down condition, which are assembled at destination to be made into whole units.

·         C.I.F.

A sale contract under which the seller is obliged to place the cargo on board the ship, pay the ocean freight and arrange insurance cover for the cargo during the voyage and until the cargo reaches the destination. He should arrange the insurance cover upon terms current in the trade, which will be for the benefit of the buyer. Seller should then arrange immediate delivery of all relevant documents including the insurance policy for the requirements and benefit of the buyer.

·         C&F

A sale contract under which the seller has the responsibility of placing the cargo on board and also incurs the ocean freight and obtain the bill of lading. It is for the buyer to arrange for an insurance cover for the voyage and until the cargo reaches the destination.

 

·         DEFENSE COSTS

Costs and expenses incurred by the defendant in a law suit in connection with defending the suit filed against him by the plaintiff (the party seeking relief from the defendant).

·         DEFENDANT

One of the parties in a negligence law suit from whom the other party seeks relief for certain wrong complained of by the latter to have been committed by the former. 

·         DEFEASIBLE INTEREST

A term relevant to marine adventure. An interest that may cease to exist after commencement of voyage. E.g. an importer insuring the goods which he bought from overseas seller, although he is entitled, if the seller be guilty of delay or other default, to reject the goods, or treat them at seller's risk.

·         DEDUCTIBLE PERIOD

Deductible to be applied in respect of each claim expressed in the form of number of days claim relating to which will not be payable under the policy. 

·         DEDUCTIBLE

The proportion of loss that the insured bears in respect of any claim. This will be in two forms, namely, amount of excess, which will be mentioned either as a fixed amount or a percentage of the sum insured or the claim amount. 

Time excess by which the insured will not be entitled to the claim relateable to a specific period (usually number of days) stated in the policy.

·         DECLINATURE

Refusal of an insurer to accept a risk proposed for insurance or to renew an existing insurance. 

·         DECLARATION CLAUSE

A clause which appears in Marine Cargo Insurance Open Policy or Open Cover. This provides that all dispatches coming under the purview of the open cover/open policy should be declared for insurance without exception, whether arrived or not. 

·         DECLARATION

Statements in an insurance contract that provide information about the property or life to be insured and used for underwriting and rating purposes and identification of the property or life to be insured.

·         DECK CARGO

Cargo carried on deck of a ship. Insurance on cargo is normally deemed to apply only to cargo carried under deck unless specifically incorporated in the policy to the effect that the cargo is carried on deck.

·         DECISION TREE

Diagram that illustrates all possible consequences of different decisions at different stages of decision making.

·         DECISION SUPPORT SYSTEM

A part of the Management Information System that provides answers to problems and that integrates the decision-maker into the system as a component.

·         DECEPTIVE PRACTICE

Concealment of actual fact. Eg. Insurance official or the agent giving impression to the prospect of some coverage being provided in the policy while no such coverage appears in the policy document

·         DEBT SERVICE

Cash required in a given period, usually one year, for payments of interest and current maturities of principal, on outstanding debt. Project financiers would require the owner of the project to take out insurance for debt service also in the event of delay in the commencement schedule of the project arising out of accidental damage to the project materials.

·         DEBRIS REMOVAL CLAUSE

The clause, when attached to a standard fire and special perils policy, on payment of an additional premium provides cover for an additional amount, in excess of the limits prescribed in the standard fire policy, as agreed to between the insurer and the insured towards costs and expenses necessarily incurred by the insured for removal of debris resulting from an accident.

·         DEBIT AND CREDIT BALANCES

If the value of debit items is more than that of credit items the account will show a debit balance and if the value of all the credit entries in the account are more than that of debit entries it will show a credit balance.

·         DEBENTURES -WORKING CAPITAL

A company can borrow money from the market for meeting its working capital requirements by issuing debentures. Normally such debentures are for short periods like 1 or 2 years. They could be either secured or unsecured.

·         DEBENTURES - UNSECURED

Debentures raised without any security

·         DEBENTURES- SECURED

Debentures issued by charging any of the assets of the company.

·         DEBENTURES - RATED OR UNRATED

Debentures are instruments, which are normally rated by credit rating agencies like ICRA, CRISIL. These agencies rate the debentures depending on the capacity of the comapny to redeem the debentures on the due dates and also to pay interest on due dates. Normally a strong rating is indicated by a rating of AAA and it goes down to `AA or `A, even `BBB. However IRDA norms prescribe that the minimum rating for investments should be of `AA and it can be reduced to A+ in specific circumstances by the investment committee of the insurance company.

·         DEBENTURES - PROJECT

Money raised through debentures by a company, for setting up a new project or for capital expenditure. Normally the period of such debentures are long term which are covered not only for the construction period of the project but also upto the period by which the company will be able to earn out of the new project to redeem the debentures. Normally such project debentures are appraised by the financial institutions.

·         DEBENTURES - OPTIONALLLY CONVERTIBLE

A company can issue debentures giving the option to the lender to convert into equity at a specified price or a formula and in case the lender does not exercise the option the debenture will be redeemed on the specified date. In this case the lender has an option to convert or not depending on the market price of the share on the date of the conversion or any other factor he may consider for conversion.

·         DEBENTURES - CONVERTIBLE / NON-CONVERTIBLE

When debentures are issued with specific understanding that after a specified period the same will be converted into equity capital of the company. either at a price determined or a price to be fixed as per the formula determined. For instance, a debenture of `1000/- issued at 14% interest for 5 years can be converted at the end of 5 years into Equity at a price of say `15 per share (Face value `10) at the end of 5 years or at a price equivalent to the average of the six monthly trading price prior to the date of conversion. When no such compulsory conversion into equity is specified in the debenture the same becomes non-convertible debenture.

·         DEBENTURE

A bond that is backed only by the general credit of the issuing corporation. No specific property is pledged as security behind the loan.

·         DEATH CLAIM

Claim lodged under the policy by the beneficiary for the death of the insured person.

·         DEATH BENEFIT

A payment made to the nominee or the legal heir of the insured under a Personal Accident Insurance Policy in the event of death.

·         DEATH

Termination of life as a result of an accident. In order that claim for such death is recoverable under the policy, the beneficiary should furnish to the insurer a death certificate issued by the concerned authority. Sometimes a postmortem certificate may also be insisted to establish the cause of death.

·         DEALER

Authorised agent of manufacturer for sale of the manufactured goods/vehicles.

·         DEADWEIGHT

The maximum weight in tons of the cargo, stores, water, fuel and crew, all put together which a ship can carry when loaded down to her load-line level.

·         DEADFREIGHT

A payment made to the nominee or the legal heir of the insured under a Personal Accident Insurance Policy in the event of insureds death.

·         DEAD WELL

A well that has ceased to produce oil or gas either temporarily or permanently.

·         DATE OF ISSUE

Date on which the policy, evidencing the coverage has been issued by the insurer.

·         DAMAGES

Monetary compensation awarded at law for a civil wrong or a breach of contract.

·         DAMAGE BY HOOKS, MUD, OIL OR OTHER EXTRANEOUS SUBSTANCES.

Group of extraneous perils covered as an extension to the coverage granted under the Marine Cargo Insurance Policy subject to the Institute Clauses ICC © or ICC (B) on payment of appropriate additional premium. The losses grouped under this category are, damage by hook, oil, mud and contamination by any extraneous matters. The hooks used by the dock labour for moving goods in bales, rolls or bags cause extensive damage and loss of contents. Contamination by mud, acid and other chemicals is also frequent in respect of bagged or baled cargo.

·         DACOITY

Robbery committed by a group of persons. Standard Burglary Insurance Policy issued to both business houses and dwellings cover loss of property arising out of a dacoity.

·         D.E.F. (DELIVERY EX SHIP)

One of the terms of contract of sale where the seller has the responsibility to arrange shipment of the goods up to the destination port and bear costs as well as risk up to that point.

·         D.D.U. (DELIVERY DUTY UNPAID)

One of the terms of contract of sale where the seller undertakes to deliver the goods at the named place in the country of the importer, but that the duty for the goods shall be paid by the buyer.

·         D.D.P. (DELIVERY DUTY PAID)

One of the terms of contract of sale where the seller undertakes to deliver the goods at the named place in the country of the importer and also pay the customs duty.

·         D.A.F. (DELIVERY AT FRONT)

One of the terms of contract of where the seller undertakes to deliver the goods at a named place or point at the frontier (at the border between the two nations).

·         DCDRF

District Consumer Disputes Redressal Forum.
Complaints against insurers for deficiency of service can be filed by the policyholders in the district forums where the compensation claimed does not exceed ` 5,00,000/-. The district forums have jurisdiction over one or more districts.

 

·         ERROR, OMISSION & ALTERATION CLAUSE

A clause in proportional treaty wordings which provides that any accidental or inadvertent error or omission shall not prejudice the treaty and the same will be corrected as soon as possible and necessary adjustments will be made.

·         ERECTION ALL RISKS INSURANCE

Policy intended to cover the projects whilst in course of construction. The policy provides coverage to all project machinery and materials against all risks, subject to certain named exclusions. The cover is extended to include all civil engineering works connected with the project, insured's surrounding property and third party liability. The period of the policy will commence from the arrival of the first consignment of the project materials at the site of erection and continue until the erection and testing is completed and the project commissioned. The sum insured will represent the estimated completed value of the project. Suitable amounts of coverage will have to be chosen by the insured for surrounding property and third partly liability coverage. This policy is wholly governed by tariff.

·         EQUITABLE INTEREST

An interest recognizable at law.

·         EQUIPMENT LEASING

Equipment purchased and leased out to another. Owner benefits by the lease rental as also by tax benefits. Insurance policies for the leased property will be issued in the name of the owner only but the lessee's interest can be noted in the policy if required by the parties. 

·         ENVIRONMENTAL RISKS

Risks attributed to the release of contaminants into the air and the disposal of industrial wastes on land and into water courses. 

·         ENVIRONMENTAL POLLUTION

The presence in the environment of any environmental pollutant. 

·         ENVIRONMENTAL POLLUTANT

Any solid, liquid or gaseous substance present in such concentration as may be or tend to be, injurious to environment. 

·         ENVIRONMENTAL IMPAIRMENT LIABILITY INSURANCE

Coverage designed to cover losses and liabilities arising from damage to property by pollution.

·         ENVIRONMENTAL DAMAGE

The injurious presence in or on land, the atmosphere, or any water course or body of water of solid, liquid, gaseous, or thermal contaminants, irritants, or pollutants. 

·         ENVIRONMENT RELIEF FUND

Fund established as per the provisions of the Public Liability Insurance Act, 1961. The relief fund shall be utilised for paying relief under the award made by the collector under the Public Liability Insurance Act and shall meet the excess over the amount paid under the insurance policy.

·         ENVIRONMENT (PROTECTION) ACT 1986

A comprehensive umbrella legislation for enforcement of measures for protection of the environment and for co-ordination of the activities of the Central and State Pollution Control Boards constituted under the Water and Air Acts.

·         ENVIRONMENT

As defined in the National Environment Tribunal Act,1995, includes water, air, and land and the interrelationship which exist among and between water, air land, human beings, other living creatures, plants, micro-organism property. 

·         ENTREPOT TRADE

The term refers to import of goods for purposes of immediate re-export to anothr country. Goods imported under this arrangement are not subject to import duty. 

·         ENERGY TREATY

Reinsurance Treaty in respect of offshore drilling rig platforms In an oil field in the deep seas pipelines for oil supply to onshore storage units, refineries etc. which are defined as Marine Hull Offshore Business.

·         ENERGY INSURANCE PACKAGE POLICY

Coverage is under five sections as per details below: 
 
1) Property Insurance Coverage for all off shore property comprising of platform, pipelines, materials on board rigs, cargo, drill barges and drill ships, multipurpose support vessels and seismic and other vessels-cover including war and strike risks.
 
2) Property Insurance Coverage for all onshore property, including land rigs and drilling equipment. 
 
3)Expenses of well control. 
 
4) Third party liabilities, comprising of specified offshore and marine liabilities and other liabilities. 

5) Terrorism coverage in respect of all interruptions. In view of the complexities of the risk and substantial reinsurance requirement, the coverage is always finalised under the direct involvement of the reinsurers right from the beginning and the cover granted as per international practices.

·         ENDORSEMENT

Memorandum issued in connection with effecting some additions, alterations or deletions in the terms of coverage granted under the standard form of policies, either at the time of issue of the standard policy at the time of commencement of insurance or any time during its currency based on mutual agreements between insured and insurer. This will be signed by the authorised signatory of the insurer and once issued, the policy and the endorsement together will constitute the evidence of the contract. 

·         EMPLOYMENT AND STUDY POLICY

A special policy designed for Indian citizens temporarily posted abroad in a sedentary non-manual work or students prosecuting studies or engaging in research activities abroad. The cover has limits as regards age of the persons to be covered and the insurer's liability. The cover is offered under two plans one for "Worldwide excluding U.S.A. and Canada" and the other "Worldwide including U.S.A. and Canada" 

·         EMPLOYER FORM

Refers, in relation to the Fidelity Guarantee Insurance, to a form to be completed by the insured (employer) which is in the nature of a proposal form and which will form the basis of the contract. This will seek for details about the employer as also the nature of the duties of the employee who should be guaranteed, the system of check in the company past defalcation if any by the employee etc. At the end, the insured will make a declaration certifying to the truthfulness of the statements made by him. 

·         EMPLOYEE (BBI INS.)

The term 'employee' is deemed to mean all existing employees (officers, clerks and sub-staff) whether permanent or temporary, whole time or part time, on contract or otherwise, including apprentices, on the salary roll of the bank at all its offices, but shall not include any director or partner other than salaried.

·         EML UNDERWRITING

Term used in connection with Engineering Reinsurance where the ceding company's retention and the treaty reinsurers' share are assessed as a percentage of the estimated maximum loss arising out of one loss event. 

·         EMBEZZLEMENT

Fraudulent use or misappropriation of another's property or money which has been entrusted to one's care. 

·         EMBARGO 1

Prohibition by the government for shipment of certain goods or merchandise to another country. Marine Insurance of such goods to such country will not be considered legally valid. 

·         EMBARGO

A governmental prohibition, either on political considerations or economic reasons against shipping movement, cargo or trade. 

·         ELECTRONIC EQUIPMENT INSURANCE

Policy which provides coverage against sudden and unforeseen material damages to any electronic equipment due to any cause, subject to certain exclusions. Broadly the cover is against fire and allied perils, explosion, machinery breakdown, short circuit and other electrical causes theft, burglary, water damage, humidity, faulty operation, gross negligence, lack of skill, falling object , entry of foreign bodies, etc. The policy is also extended to cover loss or damage to the external data media as also the cost of reconstruction of data on such external data media. Further coverage is also provided for additional expenditure incurred as a result of the result of the failure of the electronic system necessitating the use of a substitute system. The policy will be subject an excess in respect of claims on all the above heads. 

·         ELECTRICAL CLAUSE

A clause appearing as a part of the General Exclusions in the Standard Fire and Special Perils Policy relieving the insurer of liability for loss or damage to any electrical and/or electronic equipment or installation arising from over-running, excessive pressure short circuiting, arcing, self heating or leakage of electricity, from whatever cause. But the damages to any adjacent insured item consequent upon such over-running etc. is payable under the policy. 

·         EJUSDEM GENERIS

Means "of the same kind". Where general words follow specific words which have a quality in common, the general words are considered to refer merely to things of the same kind. When the policy mentions a list of named perils and end the list with the words and all other perils such expression is subject to the legal principle of ejusdem generis and means only perils similar to the ones specified earlier.

·         EIGHT SYSTEM

A system followed in reinsurance in connection with Premium Portfolio Adjustment for ascertaining unexpired risk liabilities. Policies issued during the period of twelve months are segregated into eight blocks each of one and half month. Then unexpired premium is computed by unexpired risk period of each block.

·         EFFICIENT LEVEL OF RISK

The amount of risk remaining after an individual or business pursues activities such as loss control, loss financing, and internal risk reduction, to the point where marginal benefit equals marginal cost

·         EFFECTIVE DATE

The actual date on which the insurance coverage granted under an insurance policy will come into force.

·         ECONOMICALLY VULNERABLE OR BACKWARD CLASSES

As per IRDA Regulations, means persons who live below the poverty line.

·         ECONOMIC LOSS

The estimated total cost, both insured and uninsured, incurred by an individual or family or a business house, arising out of the consequences of any accident or mishaps (such as motor vehicle accidents, work accidents, personal accidents and fires); includes such factors as property damage, funeral expenses, wage loss, and medical, hospital and legal costs as also third party liabilities 

·         ECONOMIC LIFE

Balance of period for which a machine or other property will earn to its owner more than the maintenance and/or the operating expenses for the same. This is the prime factor which is taken into account while fixing the market value of the item for insurance purposes.

·         EARTHQUAKE ZONE

For the purpose of differentiating the more earthquake-prone areas from the less-prone ones and providing different rating structures for the earthquake cover under the Fire Policy the Tariff Advisory Committee has divided the whole of India into four earthquake zones. Details of classification of the zones are provided in the fire tariff.

·         EARTHQUAKE FIRE AND SHOCK

An extension of cover provided to the standard fire and special perils policy on payment of extra premium. Loss/damage to the insured property caused by fire or shock or both resulting from earthquake is payable as per this extension.

·         EARNED PREMIUM - REINSURANCE

In relation to reinsurance, is the premium ceded and included in the year in question plus reserve for unexpired risk brought forward or portfolio premium entry less reserve for unexpired risk at the end of the current year or portfolio premium withdrawn.

·         EARNED PREMIUM

The portion of the premium which is the property of an insurance company, based on the expired portion of the policy period. For example, an insurance company is considered to have earned 75 percent of an annual premium after a period of nine months of an annual policy has elapsed.

·         EACH AND EVERY RISK EACH AND EVERY LOSS

The term relates to Treaty Reinsurance. The agreement provides for the reinsured to determine what is one risk, (Ex. whether it is one building or one group of buildings under one roof) and what is one loss. (Ex. Limiting the period and geographical scope of a loss occurrence).

·         EACH AND EVERY LOSS

Excess of loss reinsurance arranged on "Any One Event" basis under which each and every loss arising out of the one event will be accumulated and XL recovery effected of such accumulated loss en excess of the underlying loss retention of the reinsured. An event of loss is defined as 168 consecutive hours and each and every loss during that period is aggregated as stated above for application EL recovery.

·         E & O.E.

Errors and omissions excepted. 

·         ECONOMIC LIMIT IN INCREASED COST OF WORKING

The term relates to the limit up to which the insurer will pay under a fire consequential loss policy for the additional cost of working incurred by the insured to avoid totally or partially, the reduction in turnover during the indemnity period. Economic limit means the extent of gross profit saved by the incurring of the additional cost of working. 

 

·         FIELD STAFF

Company staff whose work is mainly outdoors and comprises of soliciting and procuring insurance business either directly or through the medium of insurance agents. They are remunerated by monthly salary and allowances like any other company employees but in addition are paid growth and profit incentives in relation to the business procured by them.

They also enjoy certain perks. This cadre exists as of now, only in the four nationalised insurance companies and is governed by a special scheme known as 'Development Officers' Scheme'.

·         FINANCIAL RISKS

Risks solely associated with finance extended or received, in different forms, by an individual or an enterprise, resulting in the beneficiary of finance not carrying out or not being able to carry out his/its financial obligations under the contract. Certain financial risks are insured by general insurers.

·         FIDELITY EXCLUSION

1. A provision in burglary and money insurance policies excluding loss caused by the infidelity of the employees of the insured. 

2. A provision in liability and professional indemnity policies excluding coverage for dishonest act of the insured.

·         FIDUCIARY RELATIONSHIP

Relationship arising when a person holds something in trust for another.

·         FIRE ENGINE

A motor truck equipped with water tank, pipes etc. to spray water, chemicals etc. on fires to put them off. If fire engines are maintained by the insured, a discount is given on the fire premium rate in recognition of the said feature as a risk improvement feature.

·         FIRE HAZARDS

The physical or chemical properties of a matter of whatever state which makes it susceptible to the risk of fire in varying degrees.

·         FIRE EXTINGUISHER

Instrument that uses non combustible substances like carbon dioxide to extinguish a fire, by depriving it of oxygen.

·         FIDUCIARY

A person who holds something in trust for another.

·         FIDELITY GUARANTEE POLICY

An insurance policy which reimburses an employer for losses caused by dishonest or fraudulent acts of employees.

·         FGU LOSSES

"From Ground Up" Losses - A term used in connection with excess of loss reinsurance, which refers to the incurred losses of protected portfolio of an XL cover which are also the ultimate net loss for the XL cover.

·         FEASIBILITY STUDY

Study carried out to decide workability of a project from various factors relating to physical, economical, environmental, political etc. aspects. Such a study is normally undertaken with the help of experts in various fields.

·         FEA DISCOUNT

Discount granted as per tariff for installation of fire extinguishing appliances in the insured premises. Dis count ranges from 2.5% to 10% on the premium depending upon the installations 

·         FAVOURED REINSURANCE TERMS

Reinsurers sometimes insist that reinsurance treaty terms should be same for all reinsurers of a treaty in non-reciprocal trading. There should be no discrimination by concessions to a few. Reinsures accept a share subject to 'favoured reinsurer's terms'

·         FAULTY DESIGN

Term relating to Builder's Risks Insurance. The relevant clause when attached to the Builder's Risks Insurance Policy provides cover for loss or damage to the insured property arising from faulty design of any part or parts thereof but does not extend to cover any repairing, modifying, replacing or renewing such part or parts, nor any cost or expense incurred by reason of betterment or alteration in design.

·         FAULT TREE ANALYSIS

A diagram of cause and effect relationships, showing the outcome, if a particular course of action is taken or continued. This method of analysis is increasingly used in engineering accident cause and prevention.

·         FIRE BRIGADE

Group of people specialised /trained in extinguishment of fires. 

·         FIRE AND ALLIED PERILS

A term which by convention is used to denote the following perils in addition to fire - lightning - explosion/implosion - aircraft damage - riot, strike, malicious and terrorism damage - storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation - Impact damage - subsidence and landslide including rock slide - bursting and/or overflowing of Water tanks, apparatus and pipes - missile testing operations - leakage from automatic sprinkler installations - bush fire - earth quake. 

·         FIRE & THEFT RISKS

In relation to motor insurance, refers to the restricted cover extended to a vehicle which is in garage and out of use. All India Motor Tariff provides that policies may be issued to cover only the risks of fire (which will include riot, strike, earthquake, flood etc. perils also) and/or theft whilst the car is in garage and out of use at special reduced rates of premium. 

·         FIRE

A combustion accompanied by a flame or glow, which escapes its normal confines to cause damage. 

·         FINISHED GOODS

Products or goods which have been fully manufactured, assembled or built and are ready for sale. 

·         FINANCIAL UNDERWRITING

A method of evaluating the results of a reinsurance treaty. Under this method factors like interest earned on the premium income and loss or gain in foreign exchange are also taken into account. 

·         FINANCIAL REINSURANCE

A substitute to the conventional reinsurance where funding is used as a technique to spread loss or profit over a period of years after discount for handling costs, fees, commission etc. It is mostly used as a complementary arrangement for traditional reinsurance where full capacity is not available.

·         FILE AND USE PROCEDURE

Formal submission of an insurance product with full details of coverage and rates, terms and conditions applicable to the regulator before marketing the product. If no reply comes from the regulator within the specified period the product is deemed approved. 

·         FATHOM

Measurement for assessing sea depth on the basis that one fathom equals 1.8288 metres. 

·         FATAL ACCIDENTS ACT, 1855

Act which provides that, if the death of a person is caused by wrongful act, neglect, or default, an action for damages is maintainable by the legal heirs of the deceased against the party causing injury. This act abolished the long standing rule of common law according to which a civil action for damages died with the person to whom or by whom the tort was committed. 

·         FARMERS PACKAGE COVER

A comprehensive package insurance for the benefit of the farmers to cover the individual, his/her family members, property in the house, animals, animal driven carts, agricultural tractors etc. against all accidental loss or damage and accidental death and injury. 

·         FAMILY COVERAGE

Property and/or personal lines of insurance where in addition to the individual, his or her dependants are also covered as insured persons. 

·         FALL OR DISPLACEMENT OF BUILDING CLAUSE

A provision appearing in the Standard Fire and Special Perils Policy to the effect that all insurances under the policy shall cease on expiry of seven days of fall or displacement of any insured building or part thereof or of the whole or any part of any range of insured buildings or of any structure of which such building forms part. Also known as "Fallen Building Clause" 

·         FAIR VALUE EXCHANGE ACCOUNT

A new account created as per the IRDA regulations. As per the regulations, listed equities, securities and derivative instruments shall be the assessed for the fair value on the date of the balance sheet. The fair value is the lowest of the quotations to those securities or instruments in any of the stock exchanges. An insurer has to compare such fair value with the book costs and any impairment in the value has to be transferred to the Fair Value Exchange Account. All unrealised gains and losses due to changes in the fair value of the instruments have to be taken to the Fair Value Exchange Account and as and when these gains or losses are realised, the same will be transferred to profit and loss A/c. 

·         FAIR MARKET VALUE

Price at which an asset or a service passes from a willing seller to a willing buyer, where both seller and the buyer are assumed to be rational and have a reasonable knowledge of the relevant facts. 

·         FAILURE OF CONSIDERATION

Occurs when the risk for which the insurer has accepted the premium fails to attach. The full premium paid is returnable in such circumstances, except where there is a fraud. 

·         FAILURE OF BRAKES

Breaks of the insured vehicle failing to perform their function leading to a road accident. Only consequential damages are covered under the policy. 

·         FAILED WELL INSURANCE

Coverage providing compensation to the insured if a dug well fails to yield specified quantity of water. Compensation is also payable for collapse of aside walls whilst digging is in progress. Insurance provided for both open wells and bore wells but for new wells only.

·         FACULTATIVE REINSURANCE

Oldest method of reinsurance. Each risk is considered separately and reinsured. It is necessary for the insurance company to supply the reinsurer all the material information about the risk to enable the latter to decide about acceptance of reinsurance and the extent thereof as also the rate.

·         FACULTATIVE OBLIGATORY OPEN COVER

This is similar to Facultative Obligatory Treaty but with only one difference. This has no line limitation whereas the Facultative Obligatory Treaty has. 

·         FACTUAL EXPECTATION

A fair and strong expectation of an occurrence happening resulting in someone getting an insurable interest in a property in due course. In marine insurance a person can insure a cargo in which he does not have an insurable interest at the time of proposing for the cover but he will have a factual expectation of acquiring such an interest at a later date.

·         F.O.B. INSURANCE

An Insurance cover taken by the seller of the cargo to protect his interest from the time it leaves his premises and until it is placed on board the ship and a clean bill of lading is obtained. 

·         F.O.B.

One of the contracts of sale relating to imports or exports, where the seller is responsible to place the cargo on board the ship and obtain the bill of lading from the steamer company. Thus he becomes responsible for any loss to cargo prior to its being placed on board the ship. It is for the buyer to arrange for marine insurance for cargo for the voyage and until it reaches the destination. In normal practice the buyer in F.O.B. contracts insures the cargo from warehouse to warehouse. 

·         F.I.R.

First Information Report lodged with the police authorities in case of a fire or explosion or burglary in the insured premises or road accidents involving third parties. This is one of the documents of claim, especially when claims for third party liabilities are lodged under the policy. 

·         F.C.A. (FREE CARRIER)

One of the terms of contract of sale where the seller has the responsibility to deliver the goods to a carrier to be named by the buyer at a place also to be notified by the buyer. The goods are at risk of seller till such delivery and the risk thereafter is transferred to buyer including further costs. 

·         F.C.&S CLAUSE

A standard clause in a marine insurance policy by which the insurer excludes coverage of loss due to "capture" and "seizure" as well as "arrest, restraint or detriment, and the consequence thereof or of any attempt thereat (piracy excepted), and also from all consequences of hostilities or warlike operations, whether before or after declaration of war."

·         F.A.S. (FREE ALONGSIDE SHIP)

One of the terms of contract of sale where the seller has the responsibility to place the goods on the quay alongside the ship upto, which point, they remain at his risk. The transport cost up to that point is borne by him. Once goods are so placed the risk gets transferred to the buyer including all further costs.

 

·         GROWTH RATE

Percentage change in the quantum of business when compared with the business in a base year. Growth rate in business of every year over the business in the previous year is assessed by the insurance companies to assess the business performance vis a vis the target fixed, analyse the reasons for shortfall if any, and to take corrective measures as are needed. 

Growth rates in business of the individual field personnel is also assessed, every year, for ascertaining the individual employee's eligibility for annual increment and growth incentive as per scheme.

·         GROUP PERSONAL ACCIDENT INSURANCE

Personal Accident Insurance policy issued in favour of an enterprise or an organisation or any employer, to cover their employees (and dependents also sometimes). These policies are also issued to associations, clubs,etc. for the benefit of their members.

The essential requisite for a group policy are: some common relationship among the persons to be insured and a central point for administration of the policy scheme.

·         GROUP MEDICLAIM INSURANCE

Mediclaim insurance policy issued in favour of an enterprise or an organisation or any employer, to cover their employees and dependents.These policies are also issued to associations, clubs, etc. for the benefit of their members.The essential requisite for a group policy are: some common relationship among the persons to be insured and a central point for administration of the policy scheme.

·         GROUP INSURANCE

Insurance coverage for a group of individuals engaged in some common activity. For  example, employees of an organisation, members of an association of professionals, farmers registered as a society for rural activities etc. Insurers issue group policies in accident insurance, medical insurance, professional indemnity insurance, etc. 

·         GROUP DISCOUNT

Discount allowed in the premium arrived as per manual or prospectus rates depending upon the number of persons covered under a Group Personal Accident or Group Mediclaim Insurance Policy. 

Group discounts are also allowed in the Industrial All Risks Policy, Householder's Comprehensive Insurance Policy, Shop Keeper's Package Policy also, where the discount depends upon the number of sections of coverage availed.

·         GROUND

The term is deemed to include all periods during which the aircraft is not in flight, taxiing or moored.

·         GROSS VEHICLE WEIGHT

Means in respect of any vehicle, the total weight of the vehicle and load certified and registered by the registering authority as permissible for the vehicle

·         GROSS RATE

The sum of the pure premium and a loading element.

·         GROSS PROFIT

The sum insured in respect of the Consequential Loss Policy is based on the gross profit of the business. It represents the sum total of the net profit and the insured standing charges, or if there be no Net profit, the amount of the insured standing charges less such proportion of any trading loss as the amount of the insured standing charges bears to all the standing charges of the business.

·         GROSS PREMIUM

The premium paid by the policyholder.

·         GROSS NET PREMIUM INCOME

When net account of a company is protected by an XL Cover, the premium for the net account is pro-rata to the line retained on risks. Such net account premium is Gross Net Premium of the company. The word gross signifies that the premium is before any deductions.

·         GENERAL AVERAGE

A loss, which arises in consequence of extraordinary sacrifices made, or expenses incurred for the preservation of the ship and cargo in time of common peril comes within General Average and must be borne proportionally by all those interested in the adventure. 

The principle of General Average forms a part of  the maritime law and is applicable whether or not the parties to a maritime adventure are insured.

·         GENERAL AVERAGE ESSENTIALS

(1) The whole adventure must be in peril 

(2) The peril must be imminent 

(3) The act must be voluntary 

(4) The act must be reasonable and prudent 

(5) The act must be for saving all the interests involved 

 (6) The sacrifice or the expenditure must be extraordinary in nature

·         GENERAL INSURANCE BUSINESS

General Insurance Business means fire, marine or miscellaneous insurance business, whether carried on singly or in combination with one or more of them.

·         GENERAL LIABILITY INSURANCE

Coverage that pertains, for the most part, to claims arising out of the insured's liability for injuries or damage caused by ownership of property, manufacturing operations, contracting operations, sale or distribution of products, and the operation of machinery, as well as professional services.

·         GEOGRAPHICAL LIMITATION

Territorial jurisdiction of the insurance coverage. Normally,the personal lines of insurances and liability insurances confine the coverage to accidents taking place within the country, unless specifically incorporated in the policy otherwise. 

Insurance for motor vehicles is extended on request to include Lahore, Nepal and Bhutan without any additional premium and Bangladesh by charging a flat additional premium as given in the All India Motor Tariff.

·         GINNING

A process related to the cotton commodity. Cotton staples will be combed in order to remove the cotton seed. This process will be carried out in the ginning section of the factory. The process increases the fire hazard.

·         GOLFERS EQUIPMENT INSURANCE

A special cover for golfers (non-professional) covering the golfing equipment against accidental loss or damage, whilst in golf course or in transit, personal effects of the insured against fire and theft while in or at any golf club and liability of the insured against any third party for bodily injury and/or property damage while playing or practicing golf by the former in any golf course.

·         GOODS

"Goods" means goods in the nature of merchandise, and does not include personal effects or provisions and stores for use on board.

·         GOODS IN TRUST OR ON COMMISSION

The person who holds the property of another either in trust or commission is deemed to posses an insurable interest in such property; he can accordingly insure them in his name.

·         GOODS SENT ON APPROVAL

One of the terms of sale of goods. Here the property in the goods passes from the seller to the buyer :

a) When the buyer signifies his approval to the seller or does any act adopting the transaction.

b) If he does not signify his approval but retains the goods without giving notice of rejection within the time stipulated in the contract, or if no time has been fixed, within a reasonable time.
Seller has insurable interest in the goods until one of the above two alternatives takes place.

·         GOODWILL

Reputation of a business, expressed in monetary value. Normally,goodwill is not insured by the property insurers as there is no yardstick by which it can be measured.

·         GRADED RETENTION

Any one risk retention in a pro-rata treaty are 'top' and graded. This would mean that the direct insurer has a maximum limit of retention which may reduce in respect of specific cases of risks based on qualitative analysis of the risks. Reduction in retention means corresponding reduction in surplus treaty capacity also because of line limitation.

·         GRIEVOUS INJURY

Any injury that endangers the life of the person or causes the sufferer to be in severe bodily pain or unable to follow his ordinary pursuits for a number of days. This term is specifically used in connection with "hit and run" motor accident cases where a specified compensation is payable for grievous injuries.

·         GRAMIN PERSONAL ACCIDENT INSURANCE (G.P.A. POLICY)

A special Personal Accident Insurance policy introduced for the benefit of the people living in rural areas of the country. With a sum insured per individual as ₹ 10,000 at a premium of ₹ 5 only the policy provides cover against death, loss of limbs and/or eyes and permanent total disability arising out of any accident.

·         GROSS DOMESTIC PRODUCT

Measurement of the values of all goods and services produced in a period of a year.

·         GROSS LOSS

Loss incurred by the direct insurer for the 100% of any one risk insured by him.

·         GROSS NATIONAL PRODUCT (GNP)

Total final value of goods and services produced in a national economy over a particular period of time, usually one year. The GNP growth rate is the primary indicator of the status of the economy.

·         GROSS NEGLIGENCE

Reckless action without any regard to consequences.

·         GOODS CARRIAGE

Means motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods.

·         GOLD CLAUSE AGREEMENT

This is an agreement entered into by insurers, ship owners and merchants associations who are members of the British Maritime Law Association in the year 1950 to increase the per package limit of liability of the carriers from Pound Sterling 100 to 200 and to extend the time limit for bringing action against the carriers from 1 year to 2 years. The agreement bound the signatories to bring action in the UK even though the Bill of Lading may provide for jurisdication elsewhere. This agreement, however, does not exist now.

·         GHOST ANIMALS

Animals which do not exist. It is possible that insurance is taken for animals that do not exist and subsequently putting in a claim by falsifying the records and claim documents.

·         GENERAL OPERATING EXPENSE

Administrative expenses incurred by an insurance company which does not include agents' commission and taxes paid by the company.

·         GENERAL DAMAGES

Damages awarded to an injured person for intangible loss which does not readily lend itself to quantitative measurement. Frequently called pain and suffering. General damages are distinguished from special damages which are awarded for actual economic loss, such as medical costs,legal charges, cost of repairing/replacing damaged property, loss of income, etc.

·         GENERAL AVERAGE SACRIFICE

Sacrifice of one or more interests involved in the adventure for saving rest of the major interests

·         GENERAL AVERAGE REFUND

This relates to the difference between the General Average Deposit collected and the actual general average contribution in respect of any interest saved by general average measures. Such refund is payable only to the party who holds the deposit receipt.

·         GENERAL AVERAGE LOSS

A general average loss is a loss caused by or directly consequential to a general average act. It includes general average expenditure as well as a general average sacrifice.

·         GENERAL AVERAGE GUARANTEE

Where the cargo underwriters are prepared to commit themselves to paying the contribution assessed against the insured cargo owner, they will give a written guarantee to pay the contribution attaching to the insured interest. Such guarantee is acceptable to the ship owner only if it guarantees payment of the full contribution assessed against the insured cargo. The underwriters issue such an unlimited guarantee after obtaining from the insured a counter guarantee to reimburse the underwriters for any overpayment due to under-insurance.

·         GENERAL AVERAGE FUND

A Fund created by the ship owner and the average adjuster appointed on the declaration of general average, from out of the deposits collected in connection with the general average adjustment. Ship owner has the authority, without waiting for the final adjustment, to draw from the fund for general average expenditure.

·         GENERAL AVERAGE EXPENDITURE

An extraordinary expenditure incurred by the ship owner intentionally and reasonably to preserve from peril the property involved in a common maritime adventure (for example, port of refuge expenses, salvage remuneration, etc.) is known as General Average Expenditure. 

Such an expenditure is recoverable from the general average fund but not directly from the underwriters. The underwriters liability for such expenditure would be only that part of the expenditure that related to the general average contribution payable by the insured interest.

·         GENERAL AVERAGE DEPOSIT

In the absence of any acceptable form of guarantee, the receiver of the cargo will be required to pay a deposit into the general average fund before taking delivery of the cargo. The amount to be paid as a general average deposit is usually slightly higher than the estimated contribution. 

A deposit receipt is issued against the money thus deposited and the deposit earns interest. When the adjustment is completed, the holder of the deposit receipt is paid the difference between the deposit plus accrued interest, and the contribution.

·         GENERAL AVERAGE COUNTER GUARANTEE

When the ship owner declares General Average, he insists on production of an unlimited guarantee to be provided by underwriters. 

The underwriters issue unlimited guarantee against the assured's counter guarantee whereby he commits to reimburse the underwriters the overpayment resulting from under insurance. 

When the adjustment is completed, the insurers first pay the contribution payable by the insured interest. If the contributory value of the insured interest happens to be more than the sum insured, the counter guarantee is invoked by the insurers and the insured is asked to pay back the excess amount paid on his behalf.

·         GENERAL AVERAGE CONTRIBUTION

The monetary contribution required of ship owners and cargo owners in respect of general average expenditures and general average sacrifices. 

The underwriter is liable for the general average contribution paid or payable by the assured when the general average act is performed to prevent loss from an insured peril. 

Such liability however is limited to the proportionate amount of the contribution payable by the insured, if the contributory value of the interest is more than the insured value.

·         GARBLING CLAUSE

The clause, in relation to marine/transit insurance of commodities like tobacco, coffee beans or grain, provides that the insurer will pay the cost of garbling (sifting and cleansing to separate sound from the whole), as such an exercise prevents further damage and reduces the claim.

·         GAINFUL EMPLOYMENT

A term used in connection with the Permanent Total Disablement condition under a personal accident insurance policy. The disablement is of permanent and irrecoverable nature and is absolutely total, in the sense that the insured person is prevented from engaging in any employment, which would gain him financial benefits,for example ,paralysis.

 

·         HYDRANT SYSTEM

A large discharge pipe system with valves at various places for drawing water from a water-main. Installation of hydrant system together with the existence of hand appliances will entail the insured to a discount in the premium rate under the standard Fire and Special Perils policy.

·         HUT INSURANCE SCHEME - FOR POOR FAMILIES IN RURAL AREAS

A special scheme introduced by the Government of India, with the objective of providing relief to the very poor families, in rural areas when their huts and belongings are destroyed by fire. The very poor families would mean families in the rural areas whose annual family income from all sources does not exceed `4800/- Compensation is `1000/- for a hut and ` 500 for belongings in the hut which are destroyed by fire.

The scheme, as of now, is administered by the four Hut Insurance Scheme - For Poor Families in Rural Areas insurance companies in India with the active involvement of the State Governments/Union Territories. The scheme has come into force throughout the country effective from May 1 1988.

·         HURRICANE INSURANCE

Part of a group of perils namely "storm, cyclone, typhoon, tempest, hurricane, Tornado, flood and inundation" which is inbuilt in the coverage under the standard Fire and Special Perils policy. This group of perils can, however, be opted out by the policyholder, if he desires to reduce premium cost.

·         HURRICANE

A tropical storm marked by extremely low barometric pressure and circular winds with a velocity of 125 kilometers an hour or more.

·         HULL INSURANCE

Insurance on the ship, its machinery and equipment

·         HOUSEHOLDERS COMPREHENSIVE INSURANCE

A package of insurance designed to provide householders with a broad range of property and liability coverage, pertaining to events at home as well outside.

·         HOMOGENOUS RISKS

Properties, interests or activities which are exposed to mostly similar types of perils and which normally meet with similar loss situation in the event of such perils occurring. 

Insurers consider homogenous nature of risks by evaluating them according to:
a) cause
b) effect
c) with the aim of quantifying probabilities and severity in order to fix uniform rates of premium, terms and conditions coverage etc.

·         HOMOGENEOUS EXPOSURES

Risks within a group under study that have, to a great extent, uniform characteristics as regards exposure to similar loss events and expectation of losses. Study of homogeneous exposures is carried out for the purpose of fixing rates of premium and terms and conditions in connection with insurance coverage 

·         HOLD-UP

Robbery with violence or threat of violence. A risk which is covered under the standard Burglary insurance policy

·         HEDGING

Strategy adopted by importers or exporters in connection with future purchases or sales, to overcome the loss caused by price increase or decrease as the case may be due to exchange fluctuations. Protection is obtained by hedging against exchange movements by entering into forward contracts.

·         HEAVY INDUSTRY

Traditional production Industries in the automobile, steel, rubber, petroleum and raw material areas, requiring high capitalization and producing large quantities of output. Heavy industry employs many people and is often beset with environmental impacts.

·         HEATING AND SWEATING

The former is a risk which exists in respect of cargo prone to heating by spontaneous combustion.e.g. coal, oil cakes etc. in bulk. Sweating refers to the water damage caused by condensation of water in the vessel or container hold, under circumstances of different climatic/atmospheric conditions during the voyage.

·         HEALTH INSURANCE BUSINESS OR HEALTH COVER

Means the effecting of contracts which provide sickness benefits or medical, surgical, or hospital expense benefits, whether in-patient, or out-patient, on an indemnity, reimbursement, service, prepaid, hospital or other plans basis, including assured benefits and long-term care.

·         HAZARDOUS SPORTS

In relation to Personal Accident insurance, refers to sports activities which carry with them high hazard, like racing on wheels or horseback, big game hunting, maountaineering, winter sports, skiing, ice hockey, balooning, hang gliding, river rafting, polo etc. Persons engaged in these sports are classified as high risk groups and attract extra premium over normal, if the proposal is accepted by the insurer.

·         HAZARDOUS RISKS (FIDELITY GUARANTEE INSURANCE)

Risks considered not good for insurance because of the very high hazard associated therewith and the high incidence of claims. 

(For example Jewellery sales persons, cashiers in eating houses, cinema houses and other places of entertainment, treasurers of societies or associations, employees of bullion merchants and of works of art dealing in antiques fur and valuables.)

·         HAZARDOUS GOODS

Goods in any state (solid, liquid or gas) susceptible to the risk of fire in varying degrees according to their physical properties. Hazardous goods are categorised as I, II, III and IV and rated accordingly, for the purpose of insurance, under the standard Fire and Special Perils policy.

·         HAZARD

A condition which may create or increase the chance of loss arising from any peril

·         HARD MARKET

Market situation where competitive pricing is at a minimum as companies charge the premiums necessary to meet their underwriting losses in order to avoid insolvency and boost capacity; usually associated with a sharp decline in capacity.(See also Soft Market)

·         HAND APPLIANCES

Any of the portable fire extinguishing devices containing chemicals to put out a fire. Hand appliances are basic requirements for a risk to be considered for a discount in the fire premium rating under a standard Fire and Special Perils policy. (See "F.E.A. Discount")

·         HAGUE RULES

Following an International Maritime Law Conference in Brussels in 1922 a set of rules was agreed to establish the rights and immunities of carriers in respect of the carriage of goods by sea. Many of the countries agreeing to the rules later incorporated them in statutory acts, such as the Carriage of Goods by Sea Act, 1924.

·         HIT AND RUN MOTOR ACCIDENT

Accident arising out of the use of motor vehicle or motor vehicles the identity whereof cannot be ascertained in spite of reasonable efforts for the purpose.

·         HAZARDOUS SUBSTANCE

In relation to The Public Liability Insurance Act, 1991, means a list of chemicals with quantities categorized as hazardous substances and published in the form of a notification by the Central Government for application of Public Liability Insurance Act. The act provides for public liability insurance for the purposes of providing immediate relief to the persons affected by accident occurring while handling hazardous substance. (See "Public Liability Insurance Act. 1991")

·         HOUSEBREAKING

A person is said to commit house breaking who commits house trespass if he effects his entrance into the house (or any part of it), for the purpose of committing an offence, or having committed an offence therein, he quits the house (or any part of it), such entrance or exit being made in the six ways as described in the Penal Code.

·         HOURS CLAUSE

A clause incorporated in XL Reinsurance wordings to define Any One Event of loss for the purpose of loss recoveries from the XL cover. As per this clause Any One Event is defined by consecutive number of hours as per details below: 72 consecutive hours are taken as one event for storms, earthquake, tidal waves, seaquake, volcanic eruption. 168 consecutive hours are one event in case of floods. Man-made catastrophic losses caused by riots and civil commotion are defined as 72 consecutive hours for one event in any one city. 168 consecutive hours are taken as one event for any other catastrophe.

·         HOT TESTING

In relation to project insurance, refers to:
I) operational tests, which include the checking of parts, elements and/or production lines of insured property under full or partial load and normal or simulated operating conditions including the use of feedstock or other material for normal processing or other media for load simulation. In electrical power stations hot testing means checking after connection to a grid or other load circuit of electrical generating, transforming, converting or rectifying equipment.
II) commissioning tests/acceptance tests which in turn mean operation of insured property under production conditions for the purpose of attaining (quantity, quality) specification requirements.

·         HOSTILE FIRE

A fire which does not confine itself to its normal bounds and spreads beyond its habitat. For example the fire in the gas stove spreads to the nearby items and results in a big fire. A hostile fire is covered under the policy which is extended to cover fire risks.

·         HOSPITALISATION INSURANCE

Insurance coverage to individuals providing for reimbursement of expenses incurred towards hospitalisation treatment in connection with any injury, illness, sickness or disease. The cover is extended for domiciliary hospitalisation also under certain conditions. Individuals, as also their dependants can be covered under the policy.

·         HOSPITALISATION

Admission of a patient in a hospital or a nursing home and treatment to him for injury, illness, sickness or disease.

·         HOSPITAL CONFINEMENT INDEMNITY INSURANCE

Insurance coverage to provide for a fixed compensation on a daily basis for the period of treatment in a hospital or a nursing home by the insured for any illness, injury or sickness, as against the conventional mediclaim policies which provide for reimbursement of actual expenses incurred for treatment. Any such product will have to be marketed in India after adopting the '"file and use" procedure laid down by the regulatory authority

 

·         INLAND TRANSIT CLAUSE A

This clause is attached to policies covering transportation of goods by road or rail. This insurance covers the goods against all risks of physical loss or damage. However, it does not cover all losses. The policy is subject to exclusions like, inherent vice, wilful misconduct of the insured, ordinary losses, delay and insufficiency of packing.

·         IN-HOUSE

Performing of some organisational functions within an organisation without having the services of outside agencies who carryout and/or specialise in such functions. In general insurance there exists the practice of in-house loss surveyors lawyers for part of the organisations' function in the respective areas.

·         INHERENT VICE

A term relevant in Marine Cargo insurance. This is a quality inherent in a cargo which produces damage to the cargo without the involvement or impact of an outside agency. Inherent vice is not a risk but is only an inevitability. Policies of marine insurance, even on all risks basis exclude losses caused by inherent vice.

·         INFORMATION TECHNOLOGY INSURANCE POLICY

Policy providing coverage to information technology companies or organisation against their civil liability for any claim for :
a) breach of duty or
b) for breach of contract where the act, error or omission giving rise to the breach of contract also gives rise to breach of duty
c) breach of confidentiality or
d) defamation in respect of any information technology services or information technology products that are provided by the insured in the conduct of their business.

Defence cost are also payable provided the defence of any claim against the insured is undertaken with the consent of the insurer.This is normally a claims made policy. 

·         INFLATION RATE

Rate of increase in prices of goods and services. Indices published by the Reserve Bank of India and some industrial agencies furnish the inflation rate in respect of different category of goods which are depended upon insurers and surveyors while assessing the market value of the property insured as also the property affected by an insured peril.

·         INFLATION FACTOR

Adjustment in property insurance to reflect increased construction costs. See (Escalation Clause)

·         INFLATION

Rise in the prices of goods and services as happens when demand increases over supply.

·         INFIDELITY OF EMPLOYEE

In relation to fidelity guarantee insurance, or to that section of any other policy which deals with fidelity guarantee coverage, refers to financial losses to insured caused by an act of infidelity or dishonesty on the part of a covered employee.

·         INFIDELITY EXCLUSION

In relation to money (in transit) insurance, loss of money to the insured caused by the act of fraud/dishonesty of its employee, is not payable unless discovered within 48 hours of their occurrence. However insurers would agree to delete this exclusion on payment of extra premium.

·         INEVITABLE ACCIDENT

Accident, to which no fault can be attributed to anybody. 

·         INDUSTRIAL ALL RISKS POLICY

A comprehensive insurance cover introduced mainly for the benefit of industrial houses. Cover is against all accidental loss or damage to all fixed or moving assets like building, machinery, stocks etc. with named exclusions. While consequential loss by fire and allied perils is compulsory as a part of the package, Machinery loss of profit cover is optional. Minimum sum insured under the policy should be `100 crores. This Policy is specially rated as per the guidelines of the tariff advisory committee.

·         INDIAN REINSURER

An insurer who carries on exclusively reinsurance business and is approved in this behalf by the Central Government.

·         INDIAN RAILWAYS ACT

The duties, obligations and responsibilities of the railways are governed by the provisions of the Indian Railway Act 1890 and Amendment Act, 39 of 1961. The act also prescribes time limit and procedure for lodging claims and filing suits

·         INDIAN POST OFFICE ACT, 1898,

The Act defines the liability of the Postal Authorities for loss, mid-delivery, delay or damage to any article in the course of transmission by registered post.

·         INDIAN CARRIAGE OF GOODS BY SEA ACT, 1925,

The act defines the rights, liabilities and immunities of a shipowner in respect of loss or damage to the cargo carried.

·         INDIAN CARRIAGE OF GOODS BY SEA ACT – NOTICE OF LOSS TO CARRIER

As per Article III-Rule-6, unless notice of loss or damage to cargo is given in writing to the carrier, before or at the time of removal of the cargo into the custody of the importer or his agent, or if the loss is not apparent , within three days, such removal shall be prima facie evidence of the delivery by the carrier as described in the bill of lading. 

Notice within three days need not be given if the state of the cargo at the time of such removal been the subject of joint survey or inspection carrier will any case not be liable unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.

·         INDIAN CARRIAGE OF GOODS BY SEA ACT – LIMIT OF LIABILITY OF CARRIER

As per Article IV-Rule 5 Monetary liability of the carrier for the cargo carried is limited to Sterling Pounds 100 per package or unit, or the equivalent of that sum in other currency, unless nature and value of such goods have been declared by the shipper before the shipment and inserted in the B/L. By agreement between the carrier and the shipper another maximum amount may be fixed but that maximum amount shall not be less than Sterling Pounds 100.

·         INDIAN CARRIAGE OF GOODS BY SEA ACT – CARRIER NOT RESPONSIBLE

As per Article IV-Rule 2, significant causes of loss/damage to cargo for which carrier is not responsible/liable are: fire perils of the sea act of god act of war strikes or lock-outs, riots and civil commotions insufficiency of packing of cargo insufficiency or inadequacy of marks any other cause arising without the actual fault or privity of the carrier 

·         INDEXING

Adjusting of values over time to reflect the impact of inflation

·         INDEPENDENT SURVEY REPORT

A report of inspection, of a property proposed for insurance or of a property or an interest which is the subject of an insurance claim, by an independent surveyor.

·         INDEMNITY PERIOD

A term related to the consequential loss insurance covers. Indemnity period is the period during which the business of insured will be affected either totally or even partially arising out of the damage to the business property by an insured peril. 

This period will start either from the time of the damage to the property or afterwards depending upon exactly when the business results will get affected and continue until such time when the business activities are wholly resumed and reach normalcy. 

This period is different from the period of insurance under the policy. While the commencement of the indemnity period will be sometime during the period of insurance the termination of the same may go beyond the date of expiry of the policy.

·         INDEMNITY

To compensate the sufferer of the loss to the extent of the loss suffered by him.

·         INDEMNITOR

Provider of an indemnity payment.

·         INDEMNITEE

Recipient of an indemnity payment.

·         INDEMNIFICATION OF LOSS

Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.

·         INDEMNIFIABLE LOSS

Loss recoverable under the policy in view of its being caused by peril insured against.

·         INCURRED-BUT-NOT-REPORTED (IBNR) RESERVES

Liability account on an insurer's balance sheet reflecting claims that are expected based upon statistical projections but which have not yet been reported to the insurer.

·         INCURRED LOSS RATIO

The ratio that the incurred loss bears to the gross premium.

·         INCURRED LOSS

Sum total of the amount of all claims reported and paid during the policy period and the estimated amount of all claims reported during the policy period but remaining unpaid.

For all practical purposes this is arrived at by taking the claims paid during the policy year plus the loss reserves as at the end of the policy year, minus the corresponding reserves as at the beginning of the policy year. 

The difference between the year end and beginning of the year loss reserves is called the increase/decrease in reserve and may be added/subtracted directly to/from the paid claims to produce the incurred loss.

·         INCREASE IN COST OF WORKING

This is the abnormal expenditure incurred by the insured to avert or minimise the adverse effect on the business arising out of the property damage and the consequent business interruption so that loss on the net profit and the standing charges would get avoided or at least minimised.​

Examples of such expenditure are rent for temporary premises, overtime wages to hasten the process of repairs to the damaged item, hire of machinery until affected one is set right etc.

·         INCOMPETENT

One who is not legally capable of entering into a contract.For example.mentally ill, minors etc. Contract of Insurance entered into with an incompetent person is not legally valid.

·         INCOME RECOGNITION

Normally all the interest due in the accounting year on any investment is reckoned as income of the year. However in respect of non-performing assets RBI guidelines specifically prohibit recognition of interest on these NPAs as income once, such interest is not paid on due dates. Therefore interest on such NPAs will not be treated as income even though the same may accrue within the accounting year.

·         INCOME

Cash flow from all sources, normally expressed on an annual basis

·         INCO TERMS 2000

Internationally accepted and employed terms for contracts of sale, first published by the International Chamber of Commerce (ICC) in 1936. They were revised 7 times since then. The latest revision, known as "Incoterms 2000", came into force on January 1 2000.

It modifies some of the existing terms in an updated format for ease of use and also for providing traders, lawyers, transport officials and insurers with a modern text reflecting the latest changes in the trading environment.

·         INCIDENTAL CONTRACT

Incidental (and not the main) reason for forming a contract. This is relevant in respect of Group insurance policies like Group Personal Accident insurance or Group Mediclaim insurance where the group should exist for some other homogenous functioning and should not have been formed only for availing a group policy with an intention to get premium discounts.For example employees Employees of a firm or company, members of a co-operative society or association or club etc.

·         INCHMAREE CLAUSE

Part of the insurance coverage granted under the Institute Hull clauses which relates to loss or damage to the insured vessel caused by negligence of master and/or crew and other additional perils such as loss or damage to the hull and machinery caused by bursting of boilers, breakage of shafts or any other latent defect.

·         IN-BUILT XL PROTECTIONS

Protection of a quota share treaty by a common account XL protection which is in-built. Reinsurers of quota share have to avail XL protection compulsorily and pay the XL premium cost.

·         INADVERTENT ERROR

Mistake or fault committed unintentionally, accidentally. Property insurance policies admit claims for loss/damage caused to the insured property by an insured peril, resulting from such inadvertent errors of the insured or others.

·         IN COURSE OF EMPLOYMENT

The term which is applicable with respect  to Workmen's Compensation or the Employer's Liability insurance, is defined by the courts as commencing at the end of the individual's journey from his house and stops at the commencement of his return journey, unless the employee is rendering service to his employer or is discharging some obligation imposed upon him by the contract of employment even outside his work place.

·         IMPUTED NEGLIGENCE

Case in which responsibility for damage can be transferred from the negligent party to another person, such as an employer.

·         IMPROVEMENT

Any betterment effected in either a building or equipment through expenditure of money or labour which is more than required for a mere replacement or repair or restoration to the original condition. Property insurance policies do not normally cover the increase in cost incurred for any such improvement in an item which was affected by an insured peril.

·         IMPORTANT NOTICE

It is customary to attach a red line clause called as important notice to the certificates and policies of insurance to guide the insured regarding claims procedure. This clause deals with the duty of the insured to minimise losses and preserve recovery rights, arrangement of survey and documentation of the claims. 

·         IDENTIFICATION OF ANIMAL

The methods used for recognition. Identification of the animal at time of insurance is essential so that the claim is settled only for the animal to which the cover was provided. 

·         IMPLOSION

Bursting of a property inwards due to a sudden decrease in pressure. Loss/damage to the insured property due to implosion is covered under the standard Fire and Special perils policy.

·         IMPLIED WARRANTY

An implied warranty is not expressed in the policy specifically but which is understood by both parties to be forming part of the contract and binding on both. An implied warranty must be strictly complied with. In the event of a breach of the warranty the insurer is discharged from liability as from the date of the breach, but the insurer may waive the breach or the breach may be excused by statute. 

Due diligence is an example of implied warranty in respect of all policies. Seaworthiness and Legality of Adventure are two examples in relation to Marine insurance.

·         I.A.A.I.

International Airport Authority of India, to whom, on arrival of an aircraft at the airport the air carrier hands over the imported cargo, for subsequent delivery to the importer after customs formalities.

·         IMPACT DAMAGE

A part of the cover under the standard Fire and Special Perils policy. Cover is against loss or damage to the insured property caused by impact by any rail/road vehicle or animal by direct contact not belonging to or owned by a. the Insured or any occupier of the premises or b. their employees while acting in the course of their employment.

·         IMMEDIATE REPAIRS

Vehicle needing minor repairs to be carried out following an accident when without that it can not be moved from the place of accident to the repairer's garage. This expenditure incurred by the insured is allowed under the policy lest there should be aggravation of damage to the vehicle if not removed immediately

 

·         JUST COMPENSATION

Full indemnity by the insurer for the loss sustained by the insured.

·         JUDGMENT RATING

Rate-making method for which each exposure is individually evaluated and the rate is determined largely by the underwriter's judgment.

·         JUDGEMENT

Determination of a court of competent jurisdiction upon matters submitted to it.

·         JOURNAL ENTRY AND JOURNAL BOOK

Every accounting is made by a double entry i.e. debiting one account and crediting another account. For some of the major items, a separate book is maintained to record the transactions like cash book, purchases book, sales book etc. In the case of an insurance company the same could be premium registers, claim registers, commission register etc. 

All these books will serve the purpose of a journal entry for debiting or crediting the account head for the total of the transactions. 

Apart from these books, there could be other transactions which are accounted by passing journal entries for each transaction. Such journal entries are entered in journal book.

·         JOINT HULL UNDERSTANDINGS

Understandings reached among the hull underwriters in the London market with a view ensure uniformity of approach on principles and practices concerning Hull insurance.

·         JOINT HULL SURVEY

A joint survey conducted by the surveyor appointed by the insured and the surveyor appointed by the insurer in case of an accident to the insured vessel resulting in a claim under the policy. Surveyor from the classification society may also participate in the survey in case the class of the vessel is to be certified after repairs to the vessel.

·         JOINT HULL COMMITTEE

A committee formed by the Lloyds and Company underwriters to deliberate on issues concerning Marine Hull insurance and to make recommendations on premium rates policy terms and conditions for uniform implementation.

·         JOINT CARGO SURVEY

A joint survey attended by the surveyor of the carrier and the surveyor appointed by the cargo owner/cargo underwriter in case of a loss to cargo.

·         JOINT CARGO COMMITTEE

A committee formed by the Lloyds and Company underwriters to deliberate on issues concerning cargo insurance and to make recommendations for uniform implementation.

·         JOINT ACCOUNT XL COVERS

Also called Common Account XL covers which are arranged to protect both retained quota and reinsured quota on each and every risk. This arrangement is also called "Reinsurance for Joint Account (RFJA).

·         JANATA PERSONAL ACCIDENT INSURANCE (GROUP)

Policy exactly similar to the Janata Personal Accident insurance policy for individuals issued for a group of persons in the same manner as in the case of a group personal accident insurance policy.

·         JAN AROGYA BIMA POLICY

Policy specially designed to provide cheap medical insurance coverage to poorer sections of the society. The coverage is broadly along the lines of the mediclaim policy for individuals. Individuals and their family members can be covered. Age limit is 5 to 70 years. Children between the age of 3 months and 5 years can be covered provided one or both parents are covered concurrently. Sum Insured per person is ` 5000. 

·         JETTISON

Throwing overboard of a cargo. A step resorted to by the captain of the vessel to save the vessel and/or other interests in the vessel in time of common peril. Claim for loss of cargo so jettisoned is recoverable under the marine insurance policy subject to any of the Institute Cargo clauses as long as the common peril is an insured peril.

·         JACKUP RIG

In relation to energy risks, an offshore drilling structure with tubular or derrick legs that support the deck and hull. When positioned over the drilling site, the bottoms of the legs rest on the seafloor. A jackup rig is towed or propelled to a location with its legs up. Once the legs firmly positioned on the bottom, the deck and hull height are adjusted and leveled.

·         JACKET

Outer covering containing an insurance policy. Normally it furnishes brief details of coverage, exclusions, conditions etc relating to the insurance cover granted.

·         JUDGEMENT BY DEFAULT

Judgement delivered in a court in the absence of one of the parties to the litigation, either plaintiff or defendant. 

·         JANATHA PERSONAL ACCIDENT INSURANCE (J.P.A)

An accident insurance cover specifically for the rural people and the common man. Covers death and permanent total disablement due to accidents.
Minimum and and maximum capital sum insured is `25000 and ` 1 lakh respectively. Long term cover up to 3 - 5 years also are provided with a discount on the cumulative premium.