IADLs. See instrumental activities of daily living.
IAIS. See International Association of Insurance Supervisors.
IASB. See International Accounting Standards Board.
IFRS. See International Financial Reporting Standards.
illustration. In life insurance sales, a presentation or depiction used during the sales process that includes nonguaranteed values of a life insurance policy. An illustration used in the sale of a life insurance policy may be either a basic illustration or a supplemental illustration.
illustration actuary. In the United States, an insurance company employee or a consultant hired by an insurer who meets requirements specified in the Life Insurance Illustrations Model Regulation and who is responsible for ensuring that the insurer’s life insurance sales illustrations meet the requirements of the Model Regulation and actuarial standard practices.
illustration of net cost. In a proposal for group insurance, an explanation of rates that typically covers two or more years and shows possible future ratings and premiums, provided the group’s claim experience stays within the parameters assumed for the insurance product.
immediate annuity. An annuity contract under which payment of the periodic income benefit begins one period (typically less than one year) after the contract is purchased. Contrast with deferred annuity.
immediate participation guarantee (IPG) contract. A type of retirement plan funding vehicle in which plan assets are held in an investment account in the name of the plan sponsor and deposited in the general account of the insurer. Under an IPG contract, the plan assets fully experience the actual monetary gains or losses from investing and paying benefits from the plan’s assets.
IMO. See independent marketing organization.
impaired risk class. See substandard risk class.
impairment. In the underwriting of life insurance, any aspect of a proposed insured's health, occupation, activities, or lifestyle that could increase his or her expected mortality.
impairment guide. In the underwriting of life insurance, a list of common impairments and the probable underwriting decision for proposed insureds who have each type of impairment. Insurers provide to sales agents a field underwriting manual that contains this list.
impairment rider. A policy amendment that excludes or limits coverage for a health condition or activity specified in the rider. Also known as an exclusion rider or impairment waiver.
impairment waiver. See impairment rider.
income date. See maturity date.
income protection insurance. A type of disability income coverage that provides benefits based on the extent of the insured’s actual loss of earnings from disability rather than on the insured’s inability to perform work-related duties.
income replacement table. For purposes of disability income insurance underwriting, a table that states the maximum dollar amount of monthly income benefit an insurer will issue based on a proposed insured’s net earned income.
income statement. A financial statement that reports an insurer’s revenues and expenses during a specified accounting period and that indicates whether the insurer experienced net income (profit) or a net loss during the accounting period. Also known as a statement of operations. Contrast with balance sheet.
incontestability provision. A life insurance and annuity policy provision that describes the time limit within which the insurer can dispute a policy's validity based on material misrepresentations made in the application. See also contestable period.
increasing term life insurance. Term life insurance coverage that provides a death benefit that starts at one amount and increases by some specified amount or percentage at stated intervals over the policy term. Contrast with decreasing term life insurance.
incremental cost. See marginal cost.
indemnification. Compensation or reimbursement of another’s loss.
indemnity benefits. Insurance policy benefits that are based on the actual amount of the insured’s financial loss, up to a policy limit. Homeowners insurance and some types of health insurance provide indemnity benefits. Also known as reimbursement benefits.
indemnity reinsurance. The type of reinsurance most commonly used to transfer risk in which a direct writer transfers a stated portion of its accepted risk to a reinsurer, and the reinsurer is obligated to reimburse the direct writer only after the direct writer pays benefits under reinsured policies. Indemnity reinsurance includes traditional indemnity reinsurance and finite reinsurance; and in practice, indemnity reinsurance can refer to both traditional indemnity reinsurance and finite reinsurance; however, it most often refers to traditional indemnity reinsurance. Contrast with assumption reinsurance.
independent agent. An independent contractor who works as a sales agent for an insurance company and who may be either an affiliated or nonaffiliated sales agent of the insurer. See also career agent and multiple-line agent.
independent audit. See external audit.
independent contractor. A person who contracts to do a specific task according to his own methods and who generally is not subject to the employer’s control except as to the end product or final result of the work.
independent financial advisor. In the United States, an individual registered with the Securities and Exchange Commission to give advice about investment securities. Also known as a registered investment advisor.
independent marketing organization (IMO). A non-company affiliated marketing organization that contracts with an insurance company to distribute one or more of the company’s products or product lines.
indeterminate premium structure. A variation in premium rate structures for individual life insurance products that allows the company to periodically reset premium rates on in-force whole life products while guaranteeing customers that premiums will not exceed a maximum specified level.
index. A statistical measurement system that tracks the performance of a group of similar investments.
indexed annuity. See equity indexed annuity.
indexed annuity crediting method. The method by which an insurer credits an equity indexed annuity with the monies generated from the portion of its investment portfolio that is based upon an index of stocks.
indirect costs. In accounting, costs that cannot be physically traced to one specific product, line of business, department, or other cost object. Also known as overhead expenses, common costs, or indirect expenses. Contrast with direct costs.
indirect expenses. See indirect costs.
individual annuity. An annuity purchased and owned directly by a person or purchased by a legal entity, such as a trust or corporation, on behalf of a person.
individual cession administration. A method of reinsurance record administration under which the reinsurer prepares its own cession records based on detailed information about individual cessions provided by the direct writer.
individual deductible. See deductible.
individual insurance. An insurance policy that is issued to a named person. Contrast with group insurance.
individual policy pension trust. A type of allocated retirement plan funding vehicle typically used for a small group pension plan under the terms of which plan trustees purchase individual life insurance policies or individual annuity contracts for each participant in the plan annually. Note that this arrangement uses individual, not group, annuities. Also known as a 412(i) plan.
individual retirement account. An individual retirement arrangement that takes the form of a trust or custodial account set up in the United States for the exclusive benefit of a taxpayer and his beneficiaries; the trustee must be a bank, brokerage firm, mutual fund company, or similar financial institution. Sometimes referred to as an IRA. See also individual retirement arrangement, individual retirement annuity, traditional IRA, and Roth IRA.
individual retirement annuity. In the United States, an individual retirement arrangement that takes the form of an individual annuity issued by an insurance company. Sometimes referred to as an IRA. See also individual retirement arrangement, individual retirement account, traditional IRA, and Roth IRA.
individual retirement arrangement (IRA). In the United States, a retirement savings plan that allows an individual with taxable compensation to deposit a stated amount of that income into a savings arrangement that meets requirements specified in the federal tax laws and, thus, receives favorable federal tax treatment. See also individual retirement account, individual retirement annuity, traditional IRA, and Roth IRA.
individual stop-loss coverage. Insurance purchased by employers that self-insure group health insurance plans so that they can place a maximum dollar limit on their liability for paying claims. Under individual stop-loss insurance, the insurer reimburses the employer for all claims paid for any individual that exceed a stated amount in a stated period of time. Also referred to as specific stop-loss coverage.
industrial life insurance. See home service life insurance.
inflation. A prolonged rise in the average level of prices in an economy.
inflation protection provision. A provision that can be added to a long-term care policy for an additional premium amount that adjusts policy benefits to account for inflation. Such provisions either automatically increase the daily or lifetime benefits by a specified percentage or allow the insured to opt for a higher daily benefit amount at specified intervals during the lifetime of the policy without having to show evidence of insurability. See also long-term care (LTC) insurance.
inflation risk. The risk that the average prices of goods and services will increase during an investment period, thus decreasing the purchasing power of the returns on an investment.
informal contract. A contract that is enforceable because the parties to the contract met requirements concerning the substance of the agreement rather than requirements concerning the form of the agreement. Contrast with formal contract.
in-house brokerage agency arrangement. An arrangement to distribute nonproprietary insurance products in which an insurer establishes its own brokerage agency—rather than using an outside agency—to solicit distribution agreements with other insurers to sell those insurers’ products.
initial investment. For an investment project, the amount of cash the investor must use to undertake the project. For a new annuity product, the amount of capital and surplus that an insurer must invest to establish the new product.
initial premium. The first premium paid for an insurance policy. Contrast with renewal premium.
initial public offering (IPO). The first time a corporation’s stock is offered for sale to the public.
inland marine insurance. A type of property insurance that covers property in transit over land and instruments of communication or transportation, such as tunnels and bridges.
in-network provider. A term used in the United States to describe medical care providers in a managed care plan who have a contract with the insurer to accept rates discounted from the "usual and customary" charges the insurer pays to out-of-network providers.
inside information. See material nonpublic information.
insider trading. Buying or selling a company’s securities (stocks or bonds) based upon inside information. See also inside information.
insolvency. (1) The inability of a company to pay its financial obligations as they come due. (2) For an insurer, the inability to maintain capital and surplus above the minimum standard of capital and surplus required by law.
insolvency provision. A reinsurance agreement provision that describes the rights and responsibilities of the direct writer and the reinsurer in the event that either party becomes insolvent.
inspection report. During the underwriting of individual life insurance, a type of investigative consumer report that a consumer reporting agency prepares about a proposed insured's lifestyle, occupation, or economic situation. The proposed insured must be notified that such a report may be conducted. Typically, the report notification is part of the insurance application.
installment credit. Any loan or credit arrangement that requires the borrower to make equal periodic repayments on the loan amount over a fixed period according to a prearranged payment schedule. Also known as a personal loan.
instant-issue underwriting. See real-time underwriting
institutional customer. See organizational customer.
instrumental activities of daily living (IADLs). Activities that are necessary for an individual to live independently but that aren't essential to daily functioning. IADLs include managing finances, cooking and doing laundry, shopping for food and clothing, transporting oneself in a car or on public transportation, using the telephone, and taking medications. Long-term care insurance may provide coverage for these types of services for someone who is eligible for long-term care benefits. Contrast with activities of daily living (ADLs).
insurability premium receipt. A conditional premium receipt that provides temporary insurance coverage on condition that the insurer finds that the proposed insured was insurable at least as a standard risk on a certain date specified in the premium receipt. Contrast with approval premium receipt. See also conditional premium receipt and binding premium receipt.
insurable interest. The interest an insurance policyowner has in the risk that is insured. A policyowner has an insurable interest if he is likely to suffer a genuine loss or detriment should the event insured against occur. Without the presence of insurable interest, an insurance contract would not have been formed for a lawful purpose and, thus, would be void.
insurance. A mechanism for transferring some or all of the risk of a financial loss caused by events such as fire, accident, illness, or death from an individual or entity to an insurance company.
insurance agent. Any individual appointed by an insurer to solicit applications for insurance or negotiate insurance or annuity contracts on the insurer’s behalf. See also career agent and independent agent.
insurance broker. See broker.
insurance brokerage. See insurance broker-dealer.
insurance broker-dealer. A registered subsidiary of an insurance company that primarily or exclusively sells that insurer’s variable insurance products and also provides specialized financial planning and investment services to customers. Also known as an insurance brokerage or insurance-owned broker-dealer.
insurance commissioner. In the United States, the individual who is responsible for directing the operations of a particular state's insurance department. Also known as the superintendent of insurance or director of insurance.
insurance company. See insurer.
insurance contract. See insurance policy.
insurance fraud. Any fraud that involves an insurance company, whether committed by consumers, insurance company employees, producers, health care providers, or anyone else connected with an insurance transaction. See also fraud.
insurance leverage ratio. A financial ratio used to measure an insurer’s debt burden in relationship to the resources it has available to support the debt burden. The ratio compares an insurer’s contractual reserves with its capital and/or surplus.
insurance policy. A written document that contains the terms of the agreement between the insurer and the owner of the policy. Also known as insurance contract or policy.
insurance producer. See producer.
insurance rating agency. See rating agency.
Insurance Regulatory Information System (IRIS). In the United States, a system established by the National Association of Insurance Commissioners (NAIC) to monitor the financial condition of insurers with a view toward preventing insolvencies. See also analytical phase of IRIS and statistical phase of IRIS.
insurance superintendent. See insurance commissioner.
insurance-owned broker-dealer. See insurance broker-dealer.
insurance-to-value requirement. In property insurance, a policy provision that requires the insured to insure a certain percentage of the property’s value—typically at least 80 percent—in order for any loss to be fully covered.
insured. The person whose life, health, or property is insured under an insurance policy.
insurer. A company that enters into insurance contracts to accept risk and makes a promise to pay a policy benefit to a contract owner if a covered loss occurs. Also known as an insurance company.
insurer-administered group plan. A group insurance plan for which the insurer is responsible for handling the administrative and recordkeeping aspects of the plan. Contrast with self-administered group plan.
intangible asset. An asset that represents ownership of a legal right or another nonphysical resource. Also known as intangible property. Contrast with tangible asset.
intangible property. See intangible asset.
interest. Money paid for the use of money. See also compound interest and simple interest.
interest first rule. See earnings first rule.
interest margin. See interest spread.
interest option. A life insurance policy settlement option under which the policy proceeds are left on deposit with the insurer and the interest earned on those proceeds is paid out annually, semiannually, quarterly, or monthly to the beneficiary or other payee.
interest rate. The percentage by which an amount of money is multiplied to derive the amount that is paid for the use of that money; often expressed in decimal form.
interest rate assumptions. For an insurance product, the assumed rates of investment earnings on the product in a specified period after investment expenses have been covered.
interest spread. For insurance products, the difference between the rate of return an insurer earns on its investments and the interest rate credited to products on behalf of customers. Represents the element of profit that insurers hope to earn from their investment operations. Also known as an interest margin.
interest-crediting rate. The interest rate an insurer applies to a fixed deferred annuity contract’s values to determine the accumulation value.
interest-indexed universal life policy. A universal life insurance policy that provides for interest credits to be linked to an external standard, such as the Standard & Poor’s 500 index. See also universal life insurance policy.
interest-rate cap. (1) A loan provision that sets a maximum limit on the interest rate that will be charged on an adjustable rate mortgage, even if the benchmark interest rate exceeds that cap in the future. (2) For fixed indexed annuities (FIAs), the upper limit on the amount of a reference index’s gain in value that is credited to the annuity contract.
interest-rate risk. (1) The uncertainty arising from fluctuations in market interest rates. (2) Within the system of contingency risks (C risks), the risk that market interest rates might shift, causing the insurer’s assets to lose value or its liabilities to gain value; this contingency risk is also known as C-3 risk.
intermediary. In the financial services industry, a person or entity who sells and services financial products, such as insurance products or investment products, on behalf of a financial services company. See also broker, broker-dealer, investment advisor, and producer.
internal audit. An examination of a company’s records, policies, and procedures that is conducted by the company’s own employees to ensure that service standards are met, data recorded in the company’s files is accurate and complete, and established procedures are being followed. Contrast with external audit.
internal capital. See economic capital.
internal rate of return (IRR). For a life insurance or an annuity product, the interest rate at which the product’s net cash flow must be discounted, using present value techniques, in order to exactly repay the insurer’s initial investment in the product.
internal replacement. A replacement in which the new life insurance policy or annuity contract is purchased from the same insurer that issued the original policy or contract. Contrast with external replacement.
Internal Revenue Service (IRS). An agency of the U.S. Department of the Treasury, which is responsible for collecting federal income taxes from individuals and businesses.
International Accounting Standards Board (IASB). A private organization with the mission of developing and publishing, in the public interest, a single set of global accounting standards.
International Association of Insurance Supervisors (IAIS). An organization comprised of the vast majority of insurance regulators and supervisors from around the world that was created to develop international principles and standards for insurance supervision and improve supervisory systems for the insurance industry.
International Financial Reporting Standards (IFRS). A single set of global accounting standards developed by the International Accounting Standards Board (IASB) to promote consistency, comparability, and more complete disclosure of information included in corporate financial statements.
interpleader. In the United States, a procedure by which an insurer pays a policy’s proceeds to a court, advises the court that the insurer cannot determine who should receive the proceeds, and asks the court to determine the proper recipient or recipients.
invested asset credit risk. See default risk.
investigative consumer report. A report prepared by a consumer reporting agency that contains information obtained through personal interviews with an individual’s neighbors, friends, associates, or others who may have information about the individual. See also inspection report.
investment. Any use of resources with the aim of earning a profit or a positive return.
investment activity report. An asset-liability management (ALM) report that specifies the details of all investment portfolio transactions, including all asset acquisitions and all dispositions of assets from the portfolio through sales, prepayments (redemptions), or repayment at maturity.
investment advisor. A company or individual who receives compensation in exchange for providing advice to investors about the value of securities or the advisability of buying and selling securities.
investment company. An entity in the United States that issues securities and engages primarily in investing and trading securities.
investment management fee. A fee charged the owner of a variable annuity which covers the costs of managing and operating the investment funds underlying the variable subaccounts. Also known as an asset management fee.
investment vehicle. See funding vehicle.
investment yield. A financial ratio that determines the rate of return, or yield, on an insurer’s investment portfolio; calculated by dividing the insurer’s investment portfolio income by the company’s average invested assets for the period.
investment-grade bond. A bond that is rated in the highest categories by a bond rating agency—at least Baa (Moody’s) or BBB (Standard & Poor’s)—and that is thought to have the lowest risk of default. Insurers typically invest in investment-grade bonds.
invitation to contract. A marketing communication that includes all the information necessary for a customer to make an informed purchase decision, including a complete product description, pricing details, and a method of responding to the communication. Insurers use an invitation to contract in the direct response method of insurance distribution. Contrast with invitation to inquire.
invitation to inquire. A marketing communication designed to generate interest in a product or service and provide prospective customers with a way to request and receive additional information. Insurers use an invitation to inquire in the direct response method of insurance distribution. Contrast with invitation to contract.
IPG contract. See immediate participation guarantee contract.
IPO. See initial public offering.
IRA. See individual retirement arrangement.
IRIS. See Insurance Regulatory Information System.
IRR. See internal rate of return.
irrevocable beneficiary. A life insurance policy beneficiary whose designation as beneficiary cannot be cancelled by the policyowner unless the beneficiary gives written consent. Contrast with revocable beneficiary.
IRS. See Internal Revenue Service.
IRS Form 1099R. In the United States, a tax form that insurers must provide to annuity contract owners by January 31 of each year for each annuity contract from which a disbursement was made the previous tax year.
issue instructions. Insurer guidelines showing the policy forms approved for use in each jurisdiction and the requirements various functional areas need to follow when selling or administering a new product.
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