LOMA Glossary

The LOMA Glossary of Insurance and Financial Services Terms

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M&E charge. See mortality and expense risk charge.

maintenance expenses. For an insurance company, any product-related costs, including renewal commissions and some agency expenses, incurred after an insurance contract is in force and that are necessary to keep a policy in force. Also known as renewal expenses or administrative expenses.

major medical expense coverage. Medical expense insurance coverage that provides substantial benefits after a deductible is satisfied. Major medical pays for practically all of an insured's covered medical expenses, including (1) basic hospital, surgical, and physicians’ expenses, (2) additional medical services related to illness or injuries, and (3) preventive care. Lifetime limits on how much the major medical plan will pay are high, often $1 to $2 million, or may even be unlimited.

managed health care. A method of integrating the financing and delivery of health care services within a system that manages the access to health care services and the cost of those services. See also managed health care plan.

managed health care plan. A health insurance plan that either requires insureds to use an approved network of health care providers, or creates incentives for insureds to use such providers. Network health care providers enter into contracts with the managed care plan that are designed to control costs. Managed health care plans typically cover preventive care such as check-ups.

management accounting. The field of accounting that focuses primarily on identifying, measuring, analyzing, and communicating financial information to a company’s internal stakeholders, particularly company managers, so they can decide how best to use the company’s resources. Contrast with financial accounting.

manager of agency operations. In an insurer’s home office, the person who serves as the primary link between the home office and the insurer’s field offices.

manual rating. A method of establishing group insurance premium rates under which the insurer establishes rates for very broad classifications of group insureds using its own experience with a product and information collected by various governmental and trade associations rather than the experience of one particular group. Contrast with experience rating and blended rating.

MAR. medical attendant's report. See attending physician's statement.

margin. (1) The difference between the investment return or interest rate a company pays a customer for the right to invest, or “use,” the customer’s deposited funds and the investment return or interest rate the company earns on its use of those funds. Also known as a spread. (2) In finance, a margin is collateral that the holder of a financial instrument has to deposit with a broker or other party to cover the credit risk associated with the investment.

marginal cost. The additional cost incurred from producing one additional unit of an existing product or service. Also known as incremental cost.

marginal costing. An accounting method for estimating product-related expenses in which only direct expenses are counted. Also known as direct costing. Contrast with full costing.

marginal unit cost. In accounting, the additional total expense incurred as a result of producing one additional unit of an existing product or service.

market analysis. An evaluation of all of the environmental factors that might affect product sales, including target market characteristics, economic conditions, legal or regulatory requirements, and tax considerations.

market conduct. The term that insurers and regulators use to designate the area of insurer activity involving advertising, sales, and distribution of insurance products.

market conduct examination. In the United States, a formal investigation of an insurer by one or more state insurance departments to determine if the insurer’s market conduct—that is, nonfinancial operations—are in compliance with applicable laws and regulations.

market conduct law. A law that regulates how insurance companies conduct business. Typically, market conduct laws pertain to advertising, sales, and distribution of insurance products.

market price. The price a willing buyer will pay a willing selling for a good or service.

market risk. The risk arising from movements in the direction of an entire market, such as the stock market, the bond market, or the real estate market.

market share. The ratio of a company’s sales of a product within a specified market at a given point in time to the total industry sales for that type of product in that same market.

market value adjusted (MVA) annuity. An annuity product that features fixed interest rate guarantees combined with an interest rate adjustment factor (the market value adjustment) that can cause the surrender value of the annuity to fluctuate either positively or negatively in response to market conditions. For example, surrendering the policy when market interest rates are higher than the annuity's guaranteed rate can result in the annuity contract owner receiving more money than anticipated for the contract. Conversely, if the annuity must be surrendered when market interest rates are lower than the guaranteed interest rate, the contract owner will receive less than anticipated from the contract. Commonly referred to as a modified guaranteed annuity.

marketing. The way a business organization identifies its customers, defines and develops the products or services that its customers want, and sells and distributes those products or services to customers.

marketing committee. Within an insurance company, a senior management group whose primary role is to provide overall guidance and control of the product development process.

marketing mix. The four primary marketing variables—product, price, promotion, and distribution—that companies manage in order to fulfill marketing goals.

marketing plan. A written document that states the marketing goals for a product or product line, and describes the strategies and the implementation and control efforts the company intends to use to achieve those goals.

master application. An application for group insurance that contains the specific provisions of the requested plan of insurance and is signed by an authorized officer of the proposed policyholder. See also master group insurance contract.

master group insurance contract. A legal document that certifies the relationship between an insurer and a group policyholder and specifies the benefits provided by the contract to the insured group members. Also known as the group insurance policy or group plan.

material misrepresentation. For insurance purposes, a statement made in an application for insurance that is not true and that caused the insurer to enter into a contract it would not have agreed to if it had known the truth.

material nonpublic information. Company information that has not been communicated to the general public and that a reasonable investor would consider important in making an investment decision about the company. Also known as inside information. See insider trading.

maturity date. (1) For endowment insurance, the date on which the insurer will pay an endowment policy’s face amount to the policyowner if the insured is still living. (2) For annuities, the date on which the insurer begins to make the periodic income payments under an annuity contract. Also known as the annuity date or income date. (3) For bonds, the date on which the bond issuer must repay to the bondholder the amount originally borrowed.

maturity value. See par value.

maximum daily benefit (MDB). In a long-term care insurance policy, the maximum amount the policy will pay for eligible expenses incurred during one calendar day. This amount may increase on an annual basis if the policyowner also purchased a benefit increase rider.

maximum out-of-pocket provision. A major medical expense insurance policy provision which states that the policy will cover 100 percent of allowable medical expenses after the insured has paid a specified amount out-of-pocket to satisfy deductible and coinsurance requirements. Also known as a stop-loss provision.

McCarran-Ferguson Act. A U.S. federal law under which the U.S. Congress left insurance regulation to the state governments, as long as Congress determines that regulation to be adequate.

MDB. See maximum daily benefit.

MDO insurance. See monthly debit ordinary insurance.

mediation. An alternate dispute resolution method in which an impartial third party, known as a mediator, facilitates negotiations between the parties to a legal dispute in an effort to create a mutually agreeable resolution of the dispute. See also arbitration.

Medicaid. In the United States, a joint federal and state program that provides basic medical expense and nursing home coverage to low-income individuals and to certain disabled individuals.

medical attendant’s report (MAR). See attending physician’s statement.

medical exclusion. See exclusion.

medical expense insurance. A type of health insurance coverage that provides benefits to pay for the treatment of an insured’s illnesses and injuries and some preventive care.

medical factor. See medical risk factor.

medical report. A report sometimes compiled during the underwriting of life insurance that contains a proposed insured’s answers to medical history questions recorded by a physician and the results of a medical examination of the proposed insured that is conducted by a physician.

medical risk characteristic. See medical risk factor.

medical risk factor. A physical or psychological characteristic of a proposed insured that may increase the likelihood of loss. Also known as a medical factor and a medical risk characteristic.

medical savings account (MSA). In the United States, a savings account that is to be used in conjunction with a health insurance plan that offers tax advantages. Contributions to an MSA can be directed to pay the deductible under the health insurance plan and/or the medical expenses not covered by the health insurance plan.

medically necessary services. Health insurers provide coverage only for medical services or treatments that are determined to be medically necessary. Medically necessary services are considered to be (1) consistent with the symptoms, diagnosis, and treatment of a specified condition, (2) in accordance with the standards of good medical practice, (3) not solely for the convenience of the insured, insured's family, physician, or other health care provider, and (4) furnished in the least intensive type of medical care setting required by the insured’s condition.

Medicare. In the United States, a federal government program that pays for certain health care expenses for persons age 65 and older and persons with certain disabilities.

Medicare Part A. In the United States, the component of the federal government's Medicare program that provides basic hospital insurance that covers the costs of inpatient hospital services, confinement in nursing facilities or other extended care facilities after hospitalization, home care services following hospitalization, and hospice care. Individuals who satisfy Medicare eligibility requirements are automatically enrolled in Medicare Part A without any required premium payment.

Medicare Part B. In the United States, the component of the federal government's Medicare program that provides benefits to cover the costs of physicians’ professional services and other services necessary for the diagnosis or treatment of illness or injury; eligible Medicare beneficiaries must enroll to receive benefits and pay a premium for the coverage.

Medicare Part C. In the United States, a type of insurance coverage that can be purchased from private insurance companies by individuals enrolled in Medicare. Medicare Part C takes care of the copays and deductibles charged under Medicare Part A and Medicare Part B. Also known as a Medicare Advantage Plan.

Medicare Part D. In the United States, the component of the federal government's Medicare program that subsidizes the costs of prescription drugs for those individuals enrolled in Medicare Part A and B.

Medicare supplement policy. See Medigap policy.

Medigap policy. An individual medical expense insurance policy sold by an insurance company to supplement Medicare Part A and Part B coverage in the United States. A Medigap policy is designed to cover the gap between the amount of hospital, medical, and surgical expenses incurred by an individual eligible for Medicare and the amount of those expenses that Medicare covers. Also known as a Medicare supplement policy.

member services. Within an insurance company, a customer service unit devoted exclusively to group products.

merger. A transaction in which one corporation absorbs another corporation (combining assets and liabilities of the two corporations), with the absorbed corporation ceasing to exist.

MIB. See MIB Group, Inc.

MIB Group, Inc. (MIB). A not-for-profit membership corporation established to provide coded information to insurers about medical conditions that applicants have disclosed or other insurance companies have detected in connection with previous applications for insurance.

microinsurance. Insurance protection, characterized by its low cost, that is provided to target populations such as micro entrepreneurs, small farmers, the landless, or women who are not served by typical social or insurance plans.

minimum capital and surplus requirements. Solvency requirements, established by each jurisdiction’s regulators, that set specific minimum dollar amounts of capital and surplus for an insurer as a whole and for each of the company’s product lines. Also known as statutory minimum capitalization requirements.

minimum cession. In reinsurance, the smallest monetary amount of risk that a direct writer may cede, or the smallest monetary amount of risk that a reinsurer will accept in an automatic cession.

minimum guaranteed interest rate. For a fixed deferred annuity, the minimum interest rate the insurer guarantees to pay on the accumulated value of the annuity for the life of the contract. The minimum rate is almost always stated when the annuity policy is issued, and usually ranges from 1.5 percent to 3 percent. However, sometimes the minimum guaranteed interest rate is linked to movements of an external interest indicator such as 5-year U.S. Treasury Notes.

minimum premium plan (MPP). A group health insurance funding mechanism under which the group policyholder deposits into a special account funds that are sufficient to pay a stated amount of expected claims, and the insurer administers the plan and pays claims from that special account until the funds are exhausted. Thereafter, the insurer is responsible for paying claims from its own funds, and it charges the group policyholder a premium for the coverage it provides.

misappropriation of funds. The illegal misuse of a customer’s or an insurer’s money, even if the use is on a temporary basis.

misrepresentation. Any false or misleading statement. In insurance sales, misrepresentations typically involve untrue comparisons of policies, misleading statements about the financial condition of a competitor, or false statements about policy benefits.

mission statement. A formal written statement of a company’s fundamental purpose or reason for being.

misstatement of age or sex provision. A life insurance or annuity policy provision that describes the action the insurer will take to adjust the amount of the policy benefit in the event that the age or sex of the insured is incorrectly stated.

MMMF. See money market mutual fund.

modco. See modified coinsurance.

model act. See model law.

model law. A sample law that has been created and adopted by a national or international organization of regulators, lawmakers, lawyers, and/or academics and that the sponsoring organization encourages legislatures to enact. Sometimes referred to as a model act.

Model Supervision Act. See Administrative Supervision Model Act.

modified coinsurance (modco). A type of proportional reinsurance in which (1) the direct writer maintains the entire reserve for each policy; and (2) the direct writer and reinsurer share proportionately in the reserve obligation, the direct writer’s gross premium, and the risks of loss from expenses for death, surrender, other benefits, or lapse. Modco typically is used for cash value life insurance and annuity products; and it is particularly appropriate for interest-sensitive products.

modified coverage life insurance policy. A whole life insurance policy under which the amount of insurance provided decreases by specific percentages or amounts either when the insured reaches certain stated ages or at the end of stated time periods.

modified guaranteed annuity. See market value adjusted annuity.

modified-premium whole life insurance policy. A whole life insurance policy for which the annual premium amount changes after a specified initial period (typically 5 or 10 years).

money laundering. The illegal practice of engaging in financial transactions to hide the identity, source, and/or destination of money associated with criminal activity.

money market mutual fund (MMMF). A mutual fund that pools the funds of customers to invest in short-term, low-risk investments and then pays an interest rate according to the performance of these investments.

monthly debit ordinary (MDO) insurance. An individual life insurance policy that is marketed under the home service distribution system and is paid for by monthly premium payments.

moral hazard. In the underwriting of insurance, a characteristic that exists when the reputation, financial position, or criminal record of an applicant or a proposed insured indicates that the person may act dishonestly in the insurance transaction. Contrast with physical hazard.

morbidity rate. The rate at which sickness and accidents occur among a given group of people. Contrast with mortality rate.

morbidity risk. For an insurance product, the risk that health insureds will experience sickness, accidents, or impaired conditions more frequently or for a longer period than the levels built into the product design.

morbidity table. A chart that shows the incidence of sickness and accidents, by age, occurring among a defined group of people. Contrast with mortality table.

mortality and expense (M&E) risk charge. A fee charged the owner of a variable annuity which covers various risks and expenses assumed by the insurer, including the risk involved in providing the annuity death benefit and certain other guarantees.

mortality rate. The rate at which death occurs among a specified group of people during a specified period, typically one year. Contrast with morbidity rate.

mortality risk. The risk that actual mortality will differ from expectations, causing the insurer to lose money on its products. For life insurance products, mortality risk is the likelihood that a person will die sooner than statistically expected; for annuities, mortality risk is the likelihood that a person will live longer than statistically expected.

mortality table. A chart that indicates the number of people in a defined group who are likely to die at certain ages. Contrast with morbidity table.

mortality table with projection. A type of mortality table in which the rates have been adjusted using the projection method to show future changes in mortality. Contrast with static mortality table.

mortgage. A long-term loan, secured by a pledge of specified property, that the borrower agrees to pay off with regular payments of principal and interest.

mortgage closing. A real estate transaction in which property ownership is transferred by deed, the purchase price is paid, and a promissory note and mortgage are executed.

mortgage life insurance. A plan of decreasing term insurance designed to provide a benefit amount that corresponds to the decreasing amount owed on a mortgage loan. Sometimes referred to as mortgage redemption insurance.

mortgage origination. The process of creating a mortgage loan.

mortgage redemption insurance. See mortgage life insurance.

mortgage refinancing. The process of obtaining a new mortgage and using some or all of the new mortgage loan to pay off the old mortgage.

mortgage underwriting. For mortgages, evaluating the credit of the borrower and the level of risk that each borrower poses to the lender.

mortgage-backed securities. Bonds secured by a pool of residential or commercial mortgage loans.

mortgagee. A creditor to whom an interest in real property is transferred as security for a mortgage loan.

mortgagor. A borrower who transfers an interest in real property to a creditor in exchange for a mortgage loan.

motor vehicle record (MVR). In the United States, a report that contains information about a person’s driving history, including information about traffic violations, arrests, and convictions. Often obtained during the underwriting of insurance.

MPP. See minimum premium plan.

MSA. See medical savings account.

multi-life policy. A life insurance contract that is written on two or more lives.

multiple-employer group. In group insurance, an insured group that consists of the employees of (1) two or more employers in the same industry, (2) two or more labor unions, or (3) one or more employers and one or more labor unions.

multiple-line agent. An insurance sales agent who sells life insurance, health insurance, annuities, and property-casualty products for one insurance company, with the preponderance of sales being property-casualty products. See also career agent and independent agent.

multistate cooperative examination. A market conduct examination performed on behalf of a number of states that have agreed upon the standards against which an insurer will be evaluated.

municipal bond. A bond issued by a state or local government entity whose interest income is generally exempt from federal, state, and local income taxes if the bondholder resides in the state that issued the bond.

mutual fund. An account established by a financial services company that pools the funds of many people and invests in a variety of financial instruments, such as stocks and bonds.

mutual fund company. See open-end investment company.

mutual insurance company. An insurance company that is owned by its policyowners. Contrast with stock insurance company.

mutualization. The process an insurer undertakes to convert from a stock form of ownership to a mutual form of ownership.

MVA annuity. See market value adjusted annuity.

MVR. See motor vehicle record.

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