III IC-92 key terms

The total amount a policyholder pays for coverage, including the portion that funds benefits, expenses, and profit margins, before any deductions.

The portion of a premium needed to cover expected claims or benefits only, excluding expense and profit allowances, often computed on a valuation basis.

The addition to a net premium to cover commissions, administration, taxes, and other operating costs, ensuring premiums are sufficient to fund expenses.

An equation expressing gross premium as expected benefits plus expenses plus a profit and contingency margin, divided by an adjustment factor for premiums paid at the start of a period.

A pricing approach setting premiums so the expected present value of future benefits and expenses equals the expected present value of future premium income at the pricing basis.

The set of assumptions about mortality or morbidity, interest, expenses, lapse, and taxes used to calculate premiums for a new product.

The assumptions, often prescribed or more conservative than pricing assumptions, used to calculate reserves and liabilities for policies already in force.

A liability representing the present value of future benefits and expenses minus future premiums on in-force policies, held to ensure obligations can be met.

A reserve calculated as the expected present value of future benefits and expenses less the expected present value of future net premiums at the valuation date.

A reserve calculated from accumulated past premiums minus accumulated past benefits and expenses, accumulated with interest to the valuation date.

A tabulation of death rates by age and sex, used to estimate expected claims and to compute premiums and reserves for life insurance products.

A tabulation of incidence or claim rates by age, sex, and duration, used to price health, disability, and critical illness products.

The probability per unit of exposure that a covered event, such as a diagnosis or disability, occurs during a specified period.

The expected amount paid per unit of exposure for covered events, combining the frequency of claims with the average severity of each claim.

The ratio of incurred claims to earned premium over a period, indicating whether premium income is sufficient to fund benefits.

The ratio of operating expenses to premium income, used to gauge the cost efficiency of a product and to set expense loadings.

The portion of premium or of expected present value set aside as expected profit for the insurer, often expressed as a percentage of premium or of reserves.

A technique projecting cash flows for a product over its lifetime to measure profitability under various assumptions, used to set premiums and design features.

The discount rate at which the present value of projected profits equals zero, used in profit testing to compare product profitability against a hurdle rate.

The accumulated fund attributable to a block of policies, built from premiums less claims and expenses and increased by investment returns.

A contract where the policyholder may receive dividends or bonuses reflecting the experience of the insurer, such as investment returns, mortality, and expenses.

A distribution to participating policyholders, typically declared annually, reflecting favorable experience or a share of surplus.

A product structure where the policyholder pays the entire premium once at issue, with no further premiums due during the contract term.

A premium that remains constant over the payment period, typically higher than current-cost premiums in early years to fund rising later costs.

A premium that increases with age to match the rising expected claim cost each period, with no pre-funding of future costs.

The amount a policyholder would receive on surrender of a permanent life policy, reflecting accumulated reserves less surrender charges.

The benefit payable when a policyholder terminates a policy early, often equal to the reserve minus a surrender charge or market value adjustment.

The termination of a policy because the policyholder stops paying premiums or voluntarily cancels, affecting projected cash flows and profitability.

The expected rate at which policies terminate without claim, used in pricing and profit testing to project future premium income and expenses.

The rate of investment return expected on assets backing the product, used to discount future cash flows in premium and reserve calculations.

The rate used to convert future cash flows into present values, reflecting the time value of money and risk in pricing and profit testing.

The specification of what a product covers, including benefit amounts, triggers, exclusions, and waiting periods, which drives expected claim costs.

The process of identifying a market need, designing a contract, setting assumptions and prices, and testing profitability before launch.

Testing how projected results change when one or more assumptions, such as mortality, interest, or lapses, are varied from the base case.

Evaluating product results under specified combinations of adverse or favorable assumptions, such as a pandemic or a sustained low-interest environment.

Applying severe but plausible shocks to assumptions to assess whether a product or insurer remains solvent and adequately capitalized.

The condition in which premiums are expected to cover benefits, expenses, and required profit under the pricing basis and reasonable adverse deviations.

An analysis of actual mortality, morbidity, lapse, or expense experience compared with assumptions, used to update pricing and valuation bases.