Insurance Glossary
Insurance licensing, carrier appointment and compliance terms explained.
A
Adjuster
After an insurance claim is filed, an insurance or claims adjuster evaluates, manages, and authorizes claims and payments. They evaluate accidents, damages, and settlements, comparing to policy coverages to determine insurer liability and financial responsibility. Adjusters can work for insurance co...
Affiliation
Affiliations denote a relationship between the agency and the individuals who represent it. Some state DOIs require agencies to have affiliations. Affiliations are not to be confused with DLRP (Designated Licensed Responsible Producers). They are separate relationships within the agency.
Affordable Care Act (ACA)
Enacted on March 23, 2010, the Affordable Care Act (ACA) was passed to increase healthcare insurance coverage for uninsured individuals and families and introduce reforms to the health insurance market.
Agent
An insurance agent is a licensed professional qualified to negotiate and sell insurance policies to clients. There are two main types: Captive agents work for one specific insurance company, while independent agents can work for multiple companies.
Anti-Money Laundering (AML)
The federal government requires financial institutions, including insurance business entities, to establish Anti-Money Laundering (AML) programs. AML programs are intended to identify suspicious activity and maintain compliance with regulations preventing money laundering.
Appointment Termination
Appointment termination is when an insurer ends its official authorization for a licensed insurance producer to act on its behalf. Related to Carrier Appointment Evaluation To understand appointment termination, one must understand how insurance carriers evaluate appointments. Carrier Appoin...
Attestation
Attestation is a formal confirmation (written signature, electronic verification) where an individual or business entity agrees that the information they have provided for insurance purposes is accurate. It can be part of the insurance coverage or license application process.
B
Background Check
A background check is a legally required check that agents, brokers, and adjusters must pass to obtain an insurance license. Background checks review criminal, licensing, financial, and disciplinary history, and may include fingerprinting, questionnaires, FBI-review, and other requirements. Rela...
Broker
Insurance brokers intermediate between clients and insurance companies as client representatives, working directly with clients to compare policies and choose the best coverage for their requirements. As independents, they can access a broad range of policy options to offer unbiased advice, unlike a...
Brokerage General Agency (BGA)
A brokerage general agency (BGA) is an MGA or independent firm that sells insurance products to brokers on behalf of an insurance company. They also provide advising and back-office support to individual independent brokers.
C
Captive Agency
Like captive agents, captive agencies only represent one insurance carrier. Representing a single carrier limits the products captive agencies can sell, but also enables deeper knowledge of the product and policies that can accelerate policy service and claims handling.
Carrier
A carrier is a licensed insurance company that provides and issues insurance policies, underwrites risk, collects premiums, pays claims, and assumes financial responsibility. They operate under strict regulations set by states and the National Association of Insurance Commissioners (NAIC).
Carrier Appointment
A carrier appointment is a formal authorization that allows a producer to sell on behalf of an insurance carrier. There are two steps in obtaining a carrier appointment – first the agent/agency must be contracted with the carrier. Second, the carrier then submits an appointment request to the Sta...
Claim
An insurance claim is a formal request to an insurer to pay for the agreed costs of losses, damages or accidents covered by their insurance policy. Examples include car accidents, death benefits, or theft. Filing a claim is how insured clients receive policy benefits, and they are verified by adjust...
Claims Management Company
A claims management company (CMC) is a firm that is responsible for handling, investigating, and settling insurance claims submitted by policyholders after an insured event occurs.
Company Code / NAIC Number
The insurance company code or NAIC number is a unique, 5-digit identification code that the NAIC assigns to each authorized insurance carrier. It is used to verify legitimacy and streamline claims and is assigned to all companies filing financial data with NAIC.
Continuing Education
Continuing education (CE) are state-mandated requirements that are necessary for license renewal and ensure that producers remain up to date on the latest insurance updates and standards. On average, producers must complete a certain number of CE credit hours every one to two years to stay licensed,...
Customer Service Representative
Customer Service Representatives (CSRs) work in insurance agencies to manage the day-to-day needs of existing clients, assisting with policy changes, document processing, claims applications, and more. While educated in insurance terminology, because their main concerns are customer support, not sel...
D
Department of Insurance (DOI)
Every U.S. state, the District of Columbia, and the five U.S. territories have their own Department of Insurance (DOI) which sets and enforces state-specific regulations for their insurance ecosystem. The DOI is responsible for protecting consumers, promoting fair market practices, and ensuring ins...
Designated Responsible Person/Producer/Party (DRLP)
A producer designated by a business entity to ensure compliance with state laws and regulations is known as a designated responsible licensed producer (DRLP). A business entity is required to have a DRLP for each line of authority (LOA) on their business entity insurance license. The DRLP must hold...
Designations
Designations are professional specializations individuals can earn through coursework, testing, and professional development. They demonstrate efforts to deepen knowledge and stay current in a specific field and are awarded through institutions such as The National Alliance for Insurance Education &...
Doing Business As (DBA)
“Doing Business As” is used by entities operating under fictitious trade names. It announces an alternative name that can be legally used in place of a business’s original name. Unlike LLC, it is not a business structure and does not provide the same legal protections. In most states, companies ...
E
E&O
Errors and omissions (E&O) insurance is a liability insurance that protects businesses and professionals against mistakes made while providing a professional service, including claims of negligence, malpractice, errors, omissions or failure to perform services. However, while coverage can be s...
F
Federal Employer Identification Number (EIN) / (FEIN)
A Federal Employer Identification Number (EIN) / (FEIN) is a federal tax ID number used to identify businesses, tax-exempt organizations, and other entities for tax purposes. Any company that has employees, pays certain taxes, or withholds income taxes needs an EIN.
Field Marketing Organization (FMO)
A Field Marketing Organization (FMO) is a company that provides individuals or business entities with insurance products and marketing services. They provide access to products, marketing tools, training, and back-office support so agents can focus on sales. Working with an FMO allows individuals or...
Fingerprinting
Fingerprinting is a strategy that is sometimes required as part of the background checks insurance producers must pass to stay licensed and compliant in most states. Fingerprint-based searches can be used to check an individual’s FBI and state criminal record. Fingerprinting requirements vary by ...
G
Group Code
The group code is a three-to-five-digit number assigned by the NAIC to identify affiliated companies that are part of a larger group of insurance companies. It also identifies parent companies that hold multiple insurance entities.
H
Holding Company
An insurance holding company is a parent corporation that owns controlling stakes in one or more licensed insurance carriers and other subsidiaries. They aren’t required to engage in daily business operations, but do oversee major financial and strategic decisions. This structure allows them to dive...
I
Inactive License
An inactive license is one that has not been renewed or does not have a carrier appointment. Inactive licenses differ from expired or revoked licenses and have a streamlined reactivation process. Sometimes, renewal fees are required to maintain inactive status.
Independent Agency
Like independent agents, independent agencies are free to represent multiple carriers, enabling them to offer a wider range of products to clients.
Insurance
Insurance is a risk management solution in which an individual or organization transfers the financial risk of potential loss to an insurance company in exchange for payment of a premium. The main types of insurance include home, auto, health, life, travel, and business insurance. Insurance is inte...
Insurance Agency
While an insurance carrier distributes insurance policies, an insurance agency is the entity responsible for selling insurance policies and maintaining front-facing relationships with customers. Agencies employ agents, who must be appointed with carriers to sell their product.
Insurance Distribution Channel
An insurance distribution channel encompasses the overall path insurance takes to get from the insurance carrier to the client. It includes every aspect of creating, marketing, selling, and enacting policies, and efficient distribution is essential for customer acquisition and retention. Key entitie...
Insurance Policy
An insurance policy is a contract that details the specific risks covered by the policy and the expected financial compensation for losses. Policies can be specific to business and individual needs, such as identity theft. The components of an insurance policy are the premium, policy limit, and ded...
J
Just-In-Time (JIT) Appointments
Just-In-Time (JIT) appointments allow carriers to delay appointing a producer until after they submit their first piece of business. This helps ensure that carriers appoint producers who have the potential to generate revenue.
L
License
A license is what a producer obtains that allows them to sell, solicit, or negotiate insurance products in a particular state. Producers must hold valid licenses in all the states where they conduct businesses, and licenses must be renewed on a regular basis. The National Insurance Producer Regist...
License Class
The license class is simply the type of license. These classifications are decided by the state and determine what types of insurance products the licensed producer is allowed to sell.
License Number
A license number is issued by state Departments of Insurance (DOI) and identifies a producer’s authorization to sell insurance in that state. Some states create unique license numbers, while others use NPN. See Also: NPN Another type of identifier is the NPN (National Producer Number), a unique I...
License Renewal
Producers and adjusters must renew their licenses to maintain compliance and continue to sell or service policies. Resident and non-resident licenses can be renewed online through the National Insurance Producer Registry (NIPR). The requirements for renewals vary by state and range from 60-90 days...
Line of Authority
A line of authority (LOA) is a general category or subject area of insurance in which a producer can be licensed to sell (License classes are more specific and fall within LOAs). Major LOAs include: Life Health Accident and Health Property and Casualty (P&C) Variable Life and Variable...
M
Managing General Underwriter (MGU)
A managing general underwriter (MGU) is a company granted authority by an insurer to perform underwriting on their behalf. MGUs can perform other tasks for insurers such as appointing retail agents, binding and issuing policies, collecting premiums, and managing claims on behalf of an insurer. They ...
MGA
A managing general agent (MGA) is a third-party business entity that intermediates between carriers and producers, representing the carrier. They are authorized by the insurer to transact insurance business on the insurer’s behalf, and are involved with all types of coverage, up to and including sur...
N
NAIC
The National Association of Insurance Commissioners (NAIC) is a national organization that sets industry standards for regulations, expertise, data management and analysis. It is governed by the chief insurance regulators from the 50 states and U.S. territories in order to coordinate multistate regu...
NIPR
The National Insurance Producer Registry (NIPR) is a non-profit subsidiary of NAIC that serves as a central platform for managing licensing and compliance for insurance professionals. Through the Producer Database, it streamlines license application, renewal, and maintenance across all 50 states and...
Non-Resident License
A non-resident license is an insurance license that enables an insurance agent to sell, discuss or change insurance policies in a state where they aren’t a resident. A valid resident license must be possessed to obtain a non-resident license. Related to Multi-State Licensing Requirements To und...
NPN
The NPN (National Producer Number) is a unique ID number issued by the NIPR (National Insurance Producer Registry) used to track agents and their licenses across states. Unlike license numbers, the NPN does not change from state to state, since it serves as a national identifier. It helps facilitate...
P
PDB / PDB Pull
The Insurance Producer Database (PDB) is a centralized platform that streamlines producer licensing data across the US, supporting the verification and tracking of producer-related information. It maintains diverse information like demographics, licensing details, appointment data, and regulatory hi...
Pre-licensing
A pre-licensing course is a state-required training program that producers must pass before taking the exam to get licensed for the first time. Related to Licensing Requirements To understand pre-licensing, one must know how it relates to the general requirements to obtain a license for the...
Producer
A producer is a general term used in the insurance industry to describe someone who is licensed to sell insurance, including both agents and brokers. Producers sell and negotiate insurance policies.
Q
Quote
An insurance quote is a non-binding estimation of the cost a client will pay for an insurance policy that can be used to compare coverage options. It is calculated through the underwriting process, which evaluates a client’s risk profile.
R
Rate
The policy rate, as opposed to the quote, is the baseline price a client will pay for the insurance policy. It is the standard cost for a unit of coverage, being a unit of money per $100 or $1000 of coverage the insured is looking to cover a particular risk. Premiums are customized based on rate fac...
Regulatory Actions
A regulatory action is an enforcement action carried out by state insurance departments to penalize non-compliance with state laws and regulations. Examples of regulatory actions include cease and desist orders, license suspensions, monetary fines, and restitution plans. Expired licenses, misreprese...
Reinstatement
Insurance reinstatement is the process of reactivating an insurance policy that was previously terminated. To reinstate a policy, insurers often require proof of eligibility and full payment of overdue premiums. Reinstatement terms can vary between insurers and types of insurance.
Reinsurance
AKA “insurance for insurance companies,” reinsurance is purchased by the insurer to protect themselves against unforeseen losses. It limits insurer liability for specific risks, helping insurers survive wide fluctuations in profit and loss margins. One common example is insurers purchasing reinsuran...
Resident License
A resident license is an insurance license issued to producers and businesses for their state of principal residence or principal place of business. Related to Licensing Compliance To understand the scope of a resident license, one must account for the specific compliance triggers that gover...
Rest API
API stands for “Application Programming Interface” Rest API is an interface that two computer systems use to exchange information over the internet. It enables business applications to securely exchange information with internal and third-party applications.
S
Security
A “security” is a tradable, negotiable financial instrument that holds some type of monetary value in public and private markets. Public sales of securities are regulated by the Securities and Exchange Commission (SEC). Insurance-linked securities (ILS) are a specific type of security used in the ...
State Commissioner
The state commissioner is the elected or appointed person who serves in the position in the state government, board, commission, or other body that is the primary insurance regulatory authority for the state. They are the head of the state’s insurance regulatory office.
State Regulators
State regulators are typically the staff or Insurance Commissioner of the state Department of Insurance (DOI). They are the main authority responsible for overseeing insurance practices in a specific state. They ensure that individuals and business entities comply with insurance state laws and pr...
Surplus Lines
Surplus lines insurance is a specialty insurance which protects against financial risk that is too new, great, or uncommon for a regular insurance company to take on. It is important for consumers dealing with unusual or high-risk situations. There are no guarantee funds for surplus lines insurance....
T
Third Party Administrator (TPA)
A third-party administrator (TPA) is a specialized organization hired under contract to manage specific operational services such as claims processing and employee benefits management.
Third-Party Marketing Organization (TPMO)
While third-party administrators (TPAs) handle administrative and operational functions, third-party marketing organizations (TPMOs) perform lead generation, marketing, sales, and enablement functions.
U
Unauthorized Insurer
An unauthorized insurer could be a fraudulent entity posing as a legitimate insurer, or an insurance company that is not licensed to write business in a particular state.
Underwriter
The underwriter is the professional responsible for underwriting: evaluating a proposed insured client’s potential risk. They identify, examine, and classify the degree of risk to determine whether coverage should be provided and at what rate.
Underwriting
Underwriting is the process by which an insurer measures the risks associated with insuring people and assets, then adjusts the rate according to the insurer’s risk standards and financial objectives. It is how eligibility for coverage, policy terms, and premium pricing is determined, and take...
Underwriting Risk
Underwriting risk refers to an insurer’s potential for financial loss due to inaccurate risk assessment or other uncontrollable factors when writing an insurance policy. It is used to calculate requirements for reserves and premiums.
V
Variable / Variable Products License
“Variable” refers to a product that is both insurance and securities, including life and annuities. Variable products are regulated by both securities and insurance industries and are funded through separate investment accounts. A variable products license enables a producer to sell variable insur...
Vendor Assessment
A vendor assessment helps companies assess coverage to prevent risks vendors may pose to their business, such as compliance violations, legal issues, breaches of privacy, or loss of intellectual property.
W
Workflow Management
Workflow management is the process of creating, managing, and improving the steps needed to achieve a certain task. Adequate workflow management systems increase efficiency and productivity for organizations. Specifically, Agenzee’s workflow management strategies enhance licensing and producer man...
