FCIP F510 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Binding authority

Contractual power granted by an insurer allowing a producer to commit the carrier to coverage without prior approval, limited by lines, limits, and classes.

Premium trust account

Segregated fiduciary account holding client and carrier premium funds; commingling with agency operating funds is generally prohibited.

Account current

Periodic statement reconciling agency-billed premium, commissions, and amounts owed to the carrier under the agency agreement.

Carrier appointment

Authorization from an insurer permitting a licensed producer to act on its behalf; termination may trigger notice and renewal-commission rules.

Span of control

Number of direct reports assigned to a manager; wider spans flatten hierarchy while narrow spans increase supervisory depth and cost.

Perpetuation plan

Documented strategy for agency ownership succession through internal sale, external sale, ESOP, or family transfer.

Agency value multiple

Valuation expressed as a multiple of EBITDA or commission revenue; recurring revenue and retention drive the multiple.

Producer compensation structures

Pay models including straight commission, salary plus commission, and book-ownership or equity participation arrangements.

Contingent commission

Carrier profit-sharing payment based on loss ratio, growth, and retention; not guaranteed and accrued conservatively.

Trust ratio

Relationship requiring trust assets to equal or exceed trust liabilities, including premiums collected but not remitted and return premiums due.

EBITDA

Earnings before interest, taxes, depreciation, and amortization; a common measure of agency operating profitability.

Receivables aging

Classification of accounts receivable into 0–30, 31–60, 61–90, and 90+ day buckets to identify collection and E&O risk.

Client lifetime value

Average annual revenue multiplied by gross margin and average retention years; guides marketing and retention investment.

Retention rate

Clients at end of period minus new clients acquired, divided by clients at start of period; measures book persistency.

Account rounding

Sales practice of adding lines to an existing household or commercial account to increase coverage and revenue per client.

Sales funnel

Sequence from prospecting through qualification, needs analysis, presentation, objection handling, closing, and account rounding.

Risk treatment techniques

Methods including avoidance, reduction, transfer, retention, and sharing used to manage identified exposures.

Expected loss

Product of loss frequency and average loss severity; used in pricing and risk selection decisions.

Business income coverage

Responds to loss of earnings and continuing expenses during the period of restoration, subject to a waiting period.

Umbrella versus excess

Umbrella may drop down for uncovered exposures; excess applies only above underlying limits and follows their terms.

Loss ratio

Incurred losses divided by earned premium; a key underwriting and carrier-relations performance measure.

Combined ratio

Loss ratio plus expense ratio; a result above 100 percent indicates underwriting loss.

Reservation of rights

Letter preserving an insurer's coverage defenses while claim investigation continues, without waiving policy conditions.

Claims handling sequence

Notice, acknowledgment, investigation, coverage determination, valuation, payment or denial, and subrogation recovery.

Onboarding compliance

New-hire process verifying licensing, processing carrier appointments, and delivering E&O and systems training.

Continuing education tracking

Compliance function recording state-required CE credits by license class and renewal cycle for each employee.

Performance review criteria

Measurable standards tied to job description and agency goals, including production, retention, and service metrics.

Agency management system

Core platform storing policy, client, and commission data; data integrity depends on consistent coding and entry.

Multi-factor authentication

Access control requiring two or more verification factors; a core safeguard for agency systems and client data.

Data retention policy

Schedule governing how long policy records, applications, and correspondence are kept to satisfy regulation and E&O needs.

Fiduciary duty

Legal obligation to act in the client's best interest when handling premiums and providing coverage advice.

Unfair trade practices

Prohibited conduct including misrepresentation, twisting, rebating, and unfair claim settlement practices under state law.