Chapter 1 - The insurance industry in Canada

Fundamental Principles of Insurance

Basic concepts that underpin the practice and business of insurance, including risk transfer and premium calculation.

Financial Security

A sense of stability regarding financial matters, often provided by insurance against accidental losses.

Indemnify

To compensate for loss or damage; an essential promise of insurance companies.

Insurable Interest

A requirement stating that the insured must have a legitimate interest in the property or life being insured.

Spread of Risk

The practice of distributing risk among many policyholders to protect against significant losses.

Law of Large Numbers

A principle that states the accuracy of probability estimates improves as the number of observations increases.

Adverse Selection

A situation where an insurer ends up with higher risk clients due to pricing that does not reflect actual risk.

Utmost Good Faith

A principle requiring that both parties to an insurance contract act honestly and disclose all relevant facts.

Short-Tail Lines

Insurance lines where claims are settled relatively quickly after the incident, such as property insurance.

Long-Tail Lines

Insurance lines where the time between the loss and claim resolution is extended, often spanning many years.

Indemnity Principle

The principle that an insured should be restored to their financial position prior to a loss without profiting from the insurance.

Proximate Cause

The primary cause of a loss, which must be covered for the insured to receive compensation.

Loss Minimization

An obligation for policyholders to take steps to reduce additional losses after an initial loss has occurred.

Contribution Principle

A principle stating that multiple insurers covering the same risk must share the loss payout.

Subrogation

The right of insurers to pursue third parties responsible for a loss after paying the insured.

Reinsurance

Insurance purchased by insurance companies to manage their risk exposure and enhance financial stability.

Capacity in Insurance

The ability of an insurance company to write insurance policies and assume associated risks.

Commercial Risk

The potential for loss within a business context that insurers assess when providing coverage.

Underwriting

The process insurers use to evaluate and decide on the risk of insuring a client.

Claims Settlement Process

The procedures insurers follow to assess, process, and resolve claims made by policyholders.

Insurance Premiums

The amount paid by policyholders to insurers for coverage against potential losses.

Economic Growth

An increase in the production and consumption of goods and services, which insurance supports by providing financial security.

Consumer Confidence

The degree of optimism consumers have regarding their financial situation, aided by insurance.

Plain-Language Policies

Insurance contracts written in simple, easily understood language to improve consumer comprehension.

Corporate Social Responsibility (CSR)

Businesses' efforts to have a positive impact on society, balancing profitability with social good.

Environmental, Social, and Governance (ESG)

Criteria for measuring the sustainability and societal impact of an investment in a company.

Microinsurance

Affordable insurance coverage aimed at protecting low-income individuals against specific risks.

Catastrophic Loss

Severe losses resulting from disastrous events, which reinsurance helps to mitigate.

Financial Stability in Insurance

The ability of insurance firms to maintain sound financial performance over time.

Claims Adjustment

The process of investigating and resolving insurance claims.

Insurance Industry Regulation

Laws and regulations governing the operation and practices of insurance companies.

Investment Stimulus

The encouragement of investments through the financial security provided by insurance.

Taxation in Insurance

Various taxes applied to the income and profits of insurance companies.

Consumer Education

The provision of information to help consumers understand their insurance policies and coverage.

Risk Management

The identification, assessment, and prioritization of risks followed by coordinated efforts to minimize, monitor, and control the impact of these risks.

Insurance Contract

A legally binding agreement between an insurer and the insured outlining terms, conditions, and coverage.

Insurance Brokers

Licensed professionals who help consumers buy insurance from various insurers.

Claims Process Cycle

The series of steps taken from filing a claim to final settlement.

Intangible Product

A service or product that cannot be touched or physically measured, like insurance.

Sustainable Practices

Activities aimed at ensuring long-term health and viability in the insurance industry.

Legal Liability

The state of being responsible for the financial consequences of one's actions or omissions.

Financial Loss Exposure

The potential for financial loss that an entity may face from specific risks.

Insurance Marketplace

The environment in which insurance products are bought and sold among consumers and insurers.

Insured Loss

A loss that is covered by an insurance policy.

Bonds and Investments in Insurance

Financial instruments used by insurance companies to grow their capital and provide returns.

Liquidity Risk

The risk that an insurer may not have sufficient cash flow to meet its short-term obligations.

Community Impact of Insurance

The effects of insurance on local economies and societal well-being.

Third-Party Insurance

Coverage that protects against claims from people who are not directly part of the insurance agreement.

Insurance Coverage Limits

The maximum amount an insurer will pay for a covered loss.

Underwriter

A professional who evaluates risks and determines the terms and pricing of insurance coverage.

Insurance Rate Filings

Submission of documentation by insurers to regulatory authorities justifying the rates they seek to charge for insurance.

Insurance Loss Forecasting

Estimating future losses based on historical data and statistical analysis.

Wholesale Insurance

Insurance marketed through intermediaries, typically not directly sold to the consumer.

P&C Insurance Sector

Property and casualty insurance industry that covers risks related to property damage and liabilities.

Insurance Association

An organization representing the interests of insurance companies and professionals.

Deductible

The amount an insured must pay out-of-pocket before the insurer compensates for a covered loss.

Self-Insurance

A risk management strategy where a business sets aside money to cover potential losses instead of purchasing insurance.

Geographic Risk Distribution

Spreading insurance risks across different geographic locations to minimize exposure to localized disasters.

Different Risk Classes

Categories of risks that insurers group together based on similar characteristics for underwriting purposes.

Specialized Coverage

Insurance designed for unique needs, such as marine cargo or liability in the entertainment industry.

Risk Sharing

The practice of distributing the burden of risk among multiple parties.

Capital Reserves in Insurance

Funds set aside by insurance companies to cover future claims.

Insurance Pricing Factors

Elements considered by insurers when determining premium amounts.

Insurance Consumer Trends

Notable shifts in consumer behavior or preferences regarding insurance products.

Financial Protections

Measures provided by insurance that safeguards individuals and businesses from financial losses.

Regulatory Compliance in Insurance

The adherence of insurance entities to laws and regulations governing their operations.

Insurance Networking Events

Meetings designed to connect professionals in the insurance industry for business development and education.

Asset Management in Insurance

The administration of investments held by an insurance company to maximize return and manage risk.

Insurance Penetration Rate

The proportion of a population that holds insurance coverage.

Insurance Claim Settlement Strategies

Approaches for efficient and fair handling of claims made by policyholders.

Insurance Financial Reporting

The disclosure of financial data by insurance companies to inform stakeholders of their performance.

Policyholder Rights

The entitlements of individuals or entities that have purchased insurance.

Insurance Loss Mitigation

Strategies employed to reduce the frequency or severity of insurance claims.

Market Competition in Insurance

The dynamics between different insurance companies vying for business within the marketplace.

Insurance Education Programs

Courses and resources aimed at informing consumers about insurance fundamentals.

Insurance Adjuster

A professional who investigates insurance claims and decides how much the insurer will pay.

Risk Assessment in Insurance

The process of analyzing the risks associated with insuring an individual or business.

Consumer Satisfaction in Insurance

The level of contentment experienced by policyholders with their insurance products and services.

Insurance Market Trends

Current patterns and changes influencing the insurance industry's operations.

Risk Tolerance

An individual's or company's willingness to take on financial risk.

Insurance Technology (InsurTech)

Innovative technology creating efficiencies and improving services within the insurance industry.

Disaster Recovery in Insurance

The processes insurers employ to assist policyholders in recovering from significant losses due to catastrophes.

Third-Party Liability

Legal responsibility for damages or injury caused to another party.

Insurance Risk Pooling

Combining the contributions of many insureds to cover the potential losses of a few.

Compulsory Insurance Requirements

Legal mandates requiring certain types of insurance coverage for individuals or businesses.

Insurance Claims Fraud

Deliberate misrepresentation to an insurer to obtain undeserved compensation.

Insurance Policy Exclusions

Specific conditions or circumstances that are not covered by an insurance policy.

Market Segmentation in Insurance

The process of dividing the insurance market into distinct subsets for more targeted marketing.

Insurance Compliance Audit

A methodical examination to ensure an insurance entity adheres to regulations.

Actuarial Science

The discipline that applies mathematical and statistical methods to evaluate risk in insurance.

Claims Frequency

How often claims are made by policyholders during a given period.

Consumer Advocacy in Insurance

Efforts by individuals or organizations to protect the interests of insurance consumers.

Insurance Policyholder Services

Support and assistance provided to individuals who have purchased insurance.

Risk Avoidance

A strategy to eliminate risk exposure completely, rather than insuring against it.

Insurance Premium Discounts

Reduced rates offered to customers as incentives for certain behaviors or characteristics.

Market Share in Insurance

The percentage of total sales in the insurance sector attributed to a particular company.

Consumer Insurance Literacy

The level of understanding and knowledge consumers have about insurance products.

Insurance Policy Renewal Process

The procedure through which existing insurance policies are renewed for another term.

Underwriting Risk Evaluation

The assessment performed by underwriters to determine the risk presented by a potential client.

Economic Resilience from Insurance

The ability of an economy to bounce back from hardships, supported by effective insurance.