2 Dictionary of Insurance

Dictionary of Insurance2

Dictionary ofInsurance

B. NANDHAKUMAR

Assistant Professor, Department of MBA,Hindusthan College of Arts and Science,

Coimbatore.

MUMBAI NEW DELHI NAGPUR BENGALURU HYDERABAD CHENNAI PUNE LUCKNOW AHMEDABAD ERNAKULAM BHUBANESWAR INDORE KOLKATA GUWAHATI

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© AuthorNo part of this publication may be reproduced, stored in a retrieval system, or transmitted in anyform or by any means, electronic, mechanical, photocopying, recording and/or otherwisewithout the prior written permission of the publishers.

First Edition : 2014

Published by : Mrs. Meena Pandey for Himalaya Publishing House Pvt. Ltd.,“Ramdoot”, Dr. Bhalerao Marg, Girgaon, Mumbai - 400 004.Phone: 022-23860170/23863863, Fax: 022-23877178E-mail: [email protected]; Website: www.himpub.com

Branch Offices :

New Delhi : “Pooja Apartments”, 4-B, Murari Lal Street, Ansari Road, Darya Ganj,New Delhi - 110 002. Phone: 011-23270392, 23278631;Fax: 011-23256286

Nagpur : Kundanlal Chandak Industrial Estate, Ghat Road, Nagpur - 440 018.Phone: 0712-2738731, 3296733; Telefax: 0712-2721216

Bengaluru : No. 16/1 (Old 12/1), 1st Floor, Next to Hotel Highlands, Madhava Nagar,Race Course Road, Bengaluru - 560 001.Phone: 080-22286611, 22385461, 4113 8821, 22281541

Hyderabad : No. 3-4-184, Lingampally, Besides Raghavendra Swamy Matham,Kachiguda, Hyderabad - 500 027. Phone: 040-27560041, 27550139

Chennai : 8/2 Madley 2nd street, T. Nagar, Chennai - 600 017. Mobile: 09320490962

Pune : First Floor, "Laksha" Apartment, No. 527, Mehunpura, Shaniwarpeth(Near Prabhat Theatre), Pune - 411 030. Phone: 020-24496323/24496333;Mobile: 09370579333

Lucknow : House No 731, Shekhupura Colony, Near B.D. Convent School, Aliganj,Lucknow - 226 022. Phone: 0522-4012353; Mobile: 09307501549

Ahmedabad : 114, “SHAIL”, 1st Floor, Opp. Madhu Sudan House, C.G. Road,Navrang Pura, Ahmedabad - 380 009. Phone: 079-26560126;Mobile: 09377088847

Ernakulam : 39/176 (New No: 60/251) 1st Floor, Karikkamuri Road, Ernakulam,

Kochi – 682011. Phone: 0484-2378012, 2378016; Mobile: 09387122121

Bhubaneswar : 5 Station Square, Bhubaneswar - 751 001 (Odisha).Phone: 0674-2532129, Mobile: 09338746007

Indore : Kesardeep Avenue Extension, 73, Narayan Bagh, Flat No. 302, IIIrd Floor,Near Humpty Dumpty School, Indore - 452 007 (M.P.).Mobile: 09303399304

Kolkata : 108/4, Beliaghata Main Road, Near ID Hospital, Opp. SBI Bank,Kolkata - 700 010, Phone: 033-32449649, Mobile: 7439040301

Guwahati : House No. 15, Behind Pragjyotish College, Near Sharma Printing Press,P.O. Bharalumukh, Guwahati - 781009, (Assam).Mobile: 09883055590, 08486355289, 7439040301

DTP by : Sanhita

Printed at : M/s Sri Sai Art Printer Hyderabad. On behalf of HPH.Z Printers, NewDelhi. On behalf of HPH.


Dedicated toSri Ramakrishna, Sri Sarada Devi

andSwami Vivekananda

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Preface

Insurance services account for a major component of the tertiary sectorof an economy. Hence, a vibrant insurance industry can substantiallycontribute in accelerating the growth rate of the economy. The various aspectsof insurance industry include, inter alia, marketing strategies, productdesigning, product pricing, risk management and the use of informationtechnology. This dictionary is designed to provide a useful, reliable andreadable guide to insurers, researchers, analysts, policy makers and all thosewho are interested in the insurance industry. Both beginners and seasonedprofessionals will find it full of indispensable facts.

This book provides broad coverage of the terminology employed ininsurance, including legal and financial terms likely to be used in everydayinsurance activities. It is an indispensable guide to practitioners in insuranceseeking a quick introduction to, or revision of a topic. Business advisers andother non-specialists will also find it helpful as a starting point on insuranceproblems. It contains in-excess of 4,500 fully cross-referenced insurance andinsurance related terms, abbreviations, special terms and useful addresses,there will also be a detailed section on regulatory issues, containing severalspecimen policy forms illustrating terms in context of the respective policy.

This book contains new risk management terms, and up to dateregulatory and compliance matters, legal cases, and policies. The Dictionaryof Insurance provides a quick and comprehensive reference to help students,insurance practitioners and commercial insurance buyers through the modernmaze of financial and risk management terms. It will also provide consumerswith a better understanding of the insurance products they may buy.

This dictionary is designed to provide a useful, reliable and readableguide to insurers, researchers, analysts, policy makers and all those who areinterested in the insurance industry. Both beginners and seasonedprofessionals will find it full of indispensable facts.

We shall look forward to receive suggestions, for future enrichment ofthe quality of the text.

— B. Nandhakumar


Acknowledgements

I wish to express my sincere thanks and indebtedness to Dr. S. Senbaganathan

for his invaluable guidance in completing this book.

I am thankful to Ms. Nimisha coordinator Himalaya Publishing House Pvt. Ltd.,

for taking care of the publishing work with fortitude.

I also express my heartiest thanks to my friends and family members for their

help and co-operation to complete this work successfully.

Author

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ContentsA 1 – 21

B 22 – 37

C 38 – 68

D 69 – 81

E 82 – 93

F 94 – 106

G 107 – 114

H 115 – 119

I 120 – 131

J 132 – 133

K 134

L 135 – 140

M 141 – 146

N 147 – 149

O 150 – 154

P 155 – 166

Q 167

R 168 – 174

S 175 – 182

T 183 – 187

U 188 – 190

V 191 – 192

W 193 – 194

XYZ 195


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AAAPA: AAP. Association of AuthorizedPublic Accountants.AAT: Abbr. Association of AccountingTechnicians.AS IS WHERE IS: Commercial termthat buyer shall accept delivery of goodsat the same place where it lies and in thesame condition as it exists at the time ofinspection prior to purchase. In GeneralInsurance, this term is used mostlyrelating to salvage disposal transactions.A.O.A.: Any one accident. The term, inrelation to liability insurance, refers tothe maximum liability of the insurer inrespect of all claims, both for bodilyinjury and property damages of thirdparties arising out of any one accident.A.O.V.: Any one vessel. The term,which relates to Marine Cargo Insurance,refers to the insurer's maximumcommitment under the policy for allcargo, in respect of any one vessel.A.O.Y.: Any one year. The term refersto the maximum liability of the insurerunder the policy for all claims preferredduring the policy period.A.S.A: Abbr. Actual Sum Assured.Abacus: A counting device consistingof parallel rods strung with beads, stillwidely used for business and accountingin China, Japan and India.

Abandonment: An act of giving upvoluntarily something that you own,such as an option or the right to aproperty. In marine insurance, thetransfer by the insured to an insurer toall rights, and interest in and to theinsured property.Abatement: A reduction in a payment,e.g., if a company’s or individual’s totalassets are insufficient to cover theirdebts or legacies.ABB: Abbr. Activity-based budgeting.Abbreviated Accounts: A shortenedversion of a company’s annual accountsthat a small or medium sized companycan file with the Registrar of Companies,instead of a full version.ABC: Abbr. Activity-based costing.ABM: Abbr. Activity-based management.Abnormal Gain: Any reduction in thevolume of process loss below that set bythe normal loss allowance. Abnormalgains are generally coasted as thoughthey were completed products.Abnormal Loss: Any losses whichexceed the normal loss allowance.Abnormal losses are generally coastedas though they were completed products.Abnormal Spoilage: Spoilage thatcontributes to an abnormal loss.


Above Par: Referring to a share with amarket price higher than its face value.Above-the-line: 1. Used to describeentries in a company’s profit and lossaccounts that appear above the line,which separates entries showing theorigin of the funds that have contributedto the profit or loss from those that relateto its distribution. Exceptional andextraordinary items appear above theline. 2. Relating to revenue items in agovernment budget.Abridged Accounts: Financialstatements produced by a company thatfall outside the requirements stipulatedin the Companies Act.Absorb: 1. To take in a small item so thatit forms part of a larger one. 2. To assignan overhead to a particular cost centre in acompany’s production accounts, so thatits identity becomes lost.Absorbed Overhead: An overheadattached to products or services bymeans of overhead absorption rates.Absorption: The process of making asmaller business part of a larger one, sothat the smaller company in effect nolonger exists.Absolute Assignment: The transfer ofownership of a life insurance policy to aseparate entity. The assignee becomesthe new policy owner. Commonly usedwhen banks require life insurance ascollateral for a loan.Absolute Liability: Liability fordamages even through fault ornegligence cannot be proven.Absolute Ownership: Absolute ownershipexists where the interest or explicit right ofpossession of the insured is so free fromlimitations, qualifications or restrictionsthat it cannot be taken from him withouthis consent.

Absorption Costing: 1. A form ofcosting for a product that includes, boththe direct costs of production and theindirect overhead costs as well. 2. Anaccounting practice in which fixed andvariable costs of production are absorbedby different cost centers. Providing allthe products or services can be sold at aprice that covers the allocated costs, thismethod ensures that both fixed andvariable costs are recovered in full.Absorption Rate: A rate at whichoverhead costs are absorbed into eachunit of production.Abstract: A short form of a report ordocument.Abusive Tax Shelter: A tax shelterused illegally in order to avoid or reducetax payments.ACCA: Abbr. Association of CharteredCertified Accountants.Accelerate: To reduce the amount oftime before a maturity date.Accelerated Depreciation: A system ofdepreciation which reduces the value ofassets at a high rate in the early years toencourage companies, as a result of taxadvantages, to invest in new equipment.Accelerated Death Benefit: Thisbenefit is included with many policiestoday. It provides for the payment of aportion of the death benefit prior to theinsured's death, should the insured bediagnosed as terminally ill. The specificrequirements vary by company.Acceleration: The speeding up of debtrepayment.Acceleration Clause: A clause in acontract that provides for immediatepayment of the total balance if there is abreach of contract.Acceptance: 1. The act of signing a billof exchange to show that you agree to

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pay it. 2. A bill which has been accepted.3. The act of accepting an offer of newshares for which you have applied.Acceptance Credit: An arrangement ofcredit from a bank, where the bankaccepts bills of exchange drawn on thebank by the debtor, the bank thendiscounts the bills and is responsible forpaying them when they mature. Thedebtor owes the bank for the bills butthese are covered by letters of credit.Acceptance Sampling: The process oftesting a small sample of a batch to seeif the whole batch is good enough to beaccepted.Acceptor: A person who accepts a billof exchange by signing it, thus making acommitment to pay it by a specified date.Access to the Records Clause: Theterm, also called the Inspection ofRecords Clause, refers to the right of thereinsurer to inspect any books or recordsof the Reinsured Company, at theexpense of the former.Accessory: The term generally refers tothose parts which are directly suppliedby the manufacturer along with theequipment/vehicle but which are notessential for the operation/running of theequipment/vehicle.Accident: Any unforeseen andunexpected event is considered anaccident. For insurance purposes it hasto be due to external, physical andviolent means.Accidental Death Benefit (ADB): Thisbenefit is optional with many policiestoday. It provides an additional deathbenefit, when the insured's death iscaused by an accident.Accident Insurance: Insurance whichwill pay the insured person, when anaccident takes place.

Accident and Health Insurance:Coverage for accidental injury, accidentaldeath, and related health expenses.Benefits will pay for preventative services,medical expenses and catastrophic care,with limits.Accident and Sickness Insurance:Term used to denote a personal accidentinsurance policy, which is extended tocover sickness benefits also. Howeverbenefits relating to sickness extensionwill be restricted to weeklycompensation for temporary totaldisablement and for reimbursement ofmedical expenses towards treatment in ahospital or a nursing home for allsickness other than those which areexcluded. The cover will be subject to aperiod exclusion and a maximum periodlimit in respect of any one sickness. Apolicy like this which was in existencein the Indian Market was discontinuedafter nationalization of general insurance.It is possible that in the current scenariosome companies introduce a similarinsurance cover with the approval of theregulatory authority.Accidental Bodily Injury: Injury to thebody as the result of an accident.Accident, Hit and Run: AccidentalDeath or injury arising out of the use ofa motor vehicle(s), the identity whereofcannot be ascertained inspite ofreasonable efforts for the purpose.Accidental Death Benefit: A monetarycompensation in addition to the faceamount of a life insurance policy,payable if the insured dies as the resultof an accident. Sometimes referred to as"double indemnity."Accidental Death and Dismemberment(AD & D) Benefit: A supplementary lifeinsurance policy benefit that providesfor an amount of money in addition tothe policy's basic death benefit. This


additional amount is payable if theinsured dies as the result of an accidentor if the insured loses any two limbs orthe sight in both eyes, as the result of anaccident.Accident Frequency: A measurementof number of accidents occurring in agiven period.Accident Severity: A measurement ofthe seriousness of accidents occurringwithin a given period, judged either bytheir cost or by the nature of the damageor injury to which they give rise.Accidental Means: Purely bycircumstances which are whollyunexpected, unforeseen and beyond thecontrol of the insured/beneficiary underthe policy.Accompanied Baggage: Baggage beingtaken by someone with his own personwhilst travelling.Accumulation: Percentage addition topolicy benefits as a reward to the insuredfor continuous renewal.Accumulation Period: Accumulationperiod refers to the time intervalbetween the commencement of thepolicy and the time when benefits arepaid out.Accommodation: Money lent for ashort time.Accommodation Bill: A bill ofexchange where the person signing (the‘drawee’) is helping another company(the ‘drawer’) to raise a loan.Accommodation Line: Acceptance by areinsurer, as a special consideration, of asmall accommodation line on areinsurance treaty or a facultative offer.This situation would arise where areinsurer might have shares on manyprofitable treaties from a company andthe said company might request the

reinsurer for some supporting share on atreaty with unsatisfactory results.Account: 1. A record of financialtransactions over a period of time, suchas money paid, received, borrowed orowed. 2. A structured record of financialtransactions that may be maintained as alist or in a more formal structured creditand debit basis. 3. (In a shop)arrangements in which a customeracquires goods and pays for them at alater date, usually the end of the month.4. A period during which shares aretraded for credit and at the end of whichthe shares bought must be paid for. 5. Acustomer who does a large amount ofbusiness with a firm and has an accountwith it.Account-–Profit & Loss Appropriation:The format of this account is alsoprescribed by the IRDA Regulations.This is prepared annually at the end ofthe year. This shows the appropriationsmade out of the net profit earned duringthe year. The appropriations can bedividends, transfer of general reserve ordividend equalization, etc. The finalbalance in the Profit & LossAppropriation Account is shown in theliabilities side of the balance sheet.Account–Revenue: This is theprescribed form, in which the finalaccount is to be drawn for eachdepartment of premium underwritten bythe insurer. The format is prescribed byIRDA Regulations. Thus, there is aseparate revenue account for FireDepartment, Marine Dept. and Misc.Dept. Such revenue accounts enable theunderwriter to assess the underwritingprofit generated by a particulardepartment premium.Accounting–Cash System: Basis ofaccounting by a company where allaccounting is done only if money is

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either received or paid and so no duesare recognized.Accounting–Mercantile System: Basisof accounting by a company where inaddition to the money received or paid,outstanding incomes as well as expensesare recognized.Accounting Policy: As there aredifferent methods of accountingespecially for specific items in theinsurance companies, the company isexpected to explain the method of theiraccounting by its accounting policy,which will be attached to the annualaccounts.Accounting Standards: The Institute ofChartered Accountants of India hasprescribed certain standards to befollowed while accounting certain typesof transactions, so that uniforminterpretation of the accounts of thevarious companies is possible. Thesestandards are prescribed in consonancewith similar international standardspracticed world over. Most of thestandards are to be mandatory followedby the Companies in preparation of theiraccounts. IRDA Regulations alsoprescribe that it is mandatory for theinsurance companies to follow theprescribed accounting standards, whichare around 22 in number as on date.Only the accounting standards in respectof investment income are not applicableto insurance companies.Account – Profit & Loss: This is also apart of the final accounts in which thegeneral income and expenditurepertaining to the shareholders funds areaccounted, apart from transfer of netunderwriting profit or loss from eachrevenue account. The format of thisaccount is prescribed by the IRDAregulations. This account is prepared forthe transactions of the year and is

intended to show the net profit or loss ofthe company for the year.Accountability: The fact of beingresponsible to someone for something,e.g. the accountability of directors to theshareholders.Accountable: Referring to a person whohas to explain what has taken place orwho is responsible for something.Account Analysis: Analysis of acompany’s accounts with the aim ofdiscerning how its activities affect itscosts.Accountancy: The work of an accountant.Accountancy Bodies: Professionalinstitutions and associations foraccountants.Accountancy Profession: Theprofessional bodies that establish entrystandards, organize professionalexaminations, and draw up ethical andtechnical guidelines for accountants.Accountant: 1. A person who keeps acompany’s accounts or deals with anindividual person’s tax affairs. 2. Aperson who advises a company on itsfinances. 3. A person who examinesaccounts.Accountant’s Liability: The legalliability of an accountant who commitsfraud or is held to be negligent.Accountants’ Opinion: A report of theaudit of a company’s books, carried outby a certified public accountant.Account Code: A number assigned to aparticular account in a numericalaccounting system, e.g., a chart ofaccounts.Account End: The end of an accountingperiod.Account Executive: 1. An employeewho looks after customers or who is the


link between customers and thecompany. 2. An employee of anorganization such as a bank, publicrelations firm or advertising agency whois responsible for looking after particularclients and handling their business withthe organization.Account Form: A balance sheet laid outin horizontal form. It is the opposite of‘report’ or ‘vertical’ form.Accounting: 1. The work of recordingmoney paid, received, borrowed, orowed. 2. Accountancy, the work of anaccountant as a course of study.Accounting Bases: The possible waysin which accounting concepts may beapplied to financial transactions, e.g. themethods used to depreciate assets, howintangible assets or work in progress aredealt with.Accounting Change: Any of variouschanges that affect a set of accounts, e.g.a change in the method of calculatingthe depreciation of assets or a change inthe size, structure or nature of thecompany.Accounting Concept: A generalassumption on which accounts areprepared. The main concepts are: thatthe business is a going concern, thatrevenue and costs are noted when theyare incurred and not when cash isreceived or paid, that the presentaccounts are drawn up following thesame principles as the previous accounts,that the revenue or costs are onlyrecorded if it is certain that they will beincurred.Accounting Control: Proceduresdesigned to ensure that source data foraccounts are accurate and proper, inorder to prevent fraud.Accounting Conventions: Thefundamental assumptions that govern

the practice of accounting, e.g.,consistency and prudence.Accounting Cycle: The regular processof recording, analyzing and reporting acompany’s transactions for a givenperiod.Accounting Date: The date on which anaccounting period ends, usually 31stDecember for annual accounts, but it canin fact be any date.Accounting Entity: The unit for whichfinancial statements and accountingrecords are prepared, e.g., a limitedcompany or a partnership.Accounting Equation: The basicformula that underpins double-entrybookkeeping. It can be expressedmost simply as ‘assets + expenses =liabilities + capital + revenue’ wherethe debit amounts to the left of theequals sign must be equivalent to thecredit amounts to the right. Alsocalled balance sheet equation.Accounting Error: Any accountinginaccuracy or misrepresentation that isthe result of error, not intentional fraud.Accounting Event: A transactionrecorded in a business’s books ofaccount.Accounting Fees: Fees paid to anaccountant for preparing accounts,which are deductible against tax.Accounting Information System: Asystem, usually computer-based, thatprocesses information on a company’stransactions for accounting purposes.Accounting Manual: A handbook or setof instructions that set out all proceduresand responsibilities of those engaged inan entity’s accounting systems.Accounting Period: A period of time atthe end of which the firm’s accounts aremade up.

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Accounting Policies: The accountingbases used by a company whenpreparing its financial statements.Accounting Practice: The way in whichaccountants and auditors implementaccounting policies.Accounting Principles: Standards ofaccuracy and probity that apply to thosecarrying out accounting procedures.Accounting Procedure: An accountingmethod developed by an individual ororganization to deal with routineaccounting tasks.Accounting Profits: The differencebetween revenue and the costs ofproduction.Accounting Rate of Return: A methodof valuing shares in a company wherethe company’s estimated future profitsare divided by the rate of return requiredby investors. Abbr. ARR.Accounting Records: All documents inwhich accounting information isrecorded, used during the preparation offinancial statements.Accounting Reference Date: The lastday of a company’s accountingreference period. Abbr. ARD.Accounting Reference Period: 1. Theperiod for which a company makes upits accounts. In most, but not all cases,the period is 12 months. 2. The periodfor which corporation tax is calculated.Accounting Software: Computerprograms used to enter and processaccounts information.Accounting Standard: An authoritativestatement of how particular types oftransaction and other events should bereflected in financial statements.Compliance with accounting standardswill normally be necessary for financialstatements to give a true and fair view.

Accounting System: The means usedby an organization to produce itsaccounting information.Accounting Technician: A person whoassists in the preparation of accounts butwho is not a fully qualified accountant.Accounting Unit: Any unit which takespart in financial transactions which arerecorded in a set of accounts. It can be adepartment, a sole trader, a Plc or someother unit.Account Payee: The words printed onmost of all cheques indicating that thecheque can only be paid into the accountof the person or business to whom thecheque is written, or be cashed for a feeat an agency offering a cheque cashingservice.Accounts: Detailed records of acompany’s financial affairs.Accounts Department: A departmentin a company which deals with moneypaid, received, borrowed, or owed.Accounts Manager: The manager of anaccounts department.Accounts Payable: Money owed by acompany.Accounts Receivable: Money owed to acompany. Abbr. AR.Accounts Receivable Turnover: Astatistic showing on average how longcustomers take to pay money they owefor goods or services received.Accrete: 1. (of a fund) to have interestadded to it. 2. (of assets) to grow as aresult of mergers, expansion or theacquisition of other interests.Accretion: The process of addinginterest to a fund over a period of time.Accrual: A gradual increase by addition.Accruals Basis or Accruals Concept:A method of preparing accounts in


which revenues and costs are bothreported during the period to which theyrefer and not during the period whenpayments are received or made.Accrue: 1. To record a financialtransaction in accounts when it takesplace, and not when payment is made orreceived. 2. To increase and be due forpayment at a later date.Accrued Dividend: A dividend earnedsince the last dividend was paid.Accrued Expense: An expense that hasbeen incurred within a given accountingperiod but not yet paid.Accrued Income: Revenue entered inaccounts, although payment has not yetbeen received.Accrued Interest: Interest which hasbeen earned by an interest- bearinginvestment.Accrued Liabilities: Liabilities whichare recorded in an accounting period,although payment has not yet been made.This refers to liabilities such as rent,electricity, etc. Also called accruals.Accrued Revenue: Same as accruedincome.Accumulate: To grow in quantity bybeing added to, or to get more ofsomething over a period of time.Accumulated Depreciation: The totalamount by which an asset has beendepreciated since it was purchased.Accumulated Earnings Tax orAccumulated Profits Tax: A tax onearnings above a specified limit whichare unjustifiably retained in a business toavoid paying higher personal income tax.Accumulated Profit: A profit which isnot paid as dividend but is taken overinto the accounts of the following year.

Accumulated Reserves: Reserveswhich a company has put aside over aperiod of years.Accumulation: The process of growinglarger by being added to, or of gettingmore and more of something.Accumulation Period: The timeinterval between the commencement ofthe policy and the time when benefitsare paid out.Accumulated Stocks Clause: A Clausewhich appears in Fire, ConsequentialLoss Policy. The insured, as a part oftheir business policy, may maintainstock of finished goods. Such anaccumulated stock may be utilizedduring the period of interruption causedby damage to meet the demand.Consequently, during the indemnityperiod it would appear that there was noreduction in turnover, even though themanufacturing activities are stopped. Inturn, there may not be any claim inrespect of loss of gross profit. Theaccumulated stock clause provides thatin adjusting any identifiable loss under aconsequential loss policy, account shallbe taken and allowance made, if anyshortage in turnover is avoided byreason of the turnover being maintainedfrom the accumulated stocks.Acid Test Ratio: Same as liquidity ratio.Acquisition: The takeover of a company.The results and cash flows of theacquired company are brought into thegroup accounts only from the date ofacquisition: the figures for the previousperiod for the reporting entity should notbe adjusted. The difference between thefair value of the net identifiable assetsacquired and the fair value of thepurchase consideration is goodwill.Acquisition Costs: The insurer's cost ofputting new business in force, including

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the agent's commission, the cost ofclerical work, fees for medicalexaminations and inspection reports,sales promotion expense, etc.Acquisition Accounting: A fullconsolidation, where the assets of asubsidiary company which has beenpurchased are included in the parentcompany’s balance sheet, and thepremium paid for the goodwill is writtenoff against the year’s earnings.Acquired Immuno DeficiencySyndrome (Aids): Conditioncharacterized by illness indicative ofreduced immune responsiveness inotherwise healthy individuals. TheStandard Mediclaim Insurance Policydoes not extend cover for AIDS.Acquisition Cost Factor: AcquisitionCost incurred by the direct insurertowards procuring business, which istaken into account by the reinsurer whilefixing the reinsurance commission forthe reinsurance offered.Acquisition Costs: This refers to theexpenses incurred by the Direct Insurerfor acquiring Direct Premium. Normallycommission expenses come under thiscategory. Even brokerage paid if anyand also initial Publicity expenses forproduct launches can be considered asAcquisition Costs.Across-the-Board: Applying toeverything or everyone.Act: A law passed by parliament whichmust be obeyed by the people.Act in Force Clause: A Clause includedin Excess of Loss Treaties pertaining toLiability Insurance, where such liabilityis statutory, to take care of changes inlaw or act about quantum ofcompensation during the cover period,by revision of rate and/or underlying

loss retention as well as the limit of theexcess of loss cover.Act Liability with Fire &/or Theft:Provision under the Motor InsuranceTariff to cover a motor vehicle againstact liability of the insured together withrestricted own damage to the vehiclecaused by Fire, External Explosion,Self-ignition or lightning or burglary,house breaking or theft. There is apercentage reduction from the premiumapplicable for the own damage portionof the cover in view of the above-restricted scope of the cover, which isprovided in the tariff.Act of God Perils: Any event notcaused or contributed to by man. Somesudden and irresistible acts of nature thatcould not reasonably have been foreseenor prevented, such as floods orexceptionally high tides, storms,lightning, earthquakes, etc. constituteAct of God Perils.Act only Policy: Insurance Coverage forall motor vehicles to indemnify theinsured up to the limits prescribed in theMotor Vehicle Act, 1988 in respect ofhis legal liability to pay compensationfor death or bodily injury to any thirdparty or damage to the property of anythird party caused in any accident orseries of accidents arising out of oneevent in so far as is necessary to meetthe requirements of section 147 of theMotor Vehicle Act, 1988.Act of God: Any accidental act whichcould not have been prevented by anyamount of human care and fore thought.Active: Involving many transactions oractivities.Active Account: An account, such as abank account or investment account,which is used to deposit and withdrawmoney frequently.


Active Partner: A partner who works ina company that is a partnership.Activity: Something which is done,especially something which is involvedin creating a product or a service.Activity-based Budgeting: Theallocation of resources to individualactivities. Activity based budgetinginvolves determining which activitiesincur costs within an organization,establishing the relationships betweenthem, and then deciding how much ofthe total budget should be allocated toeach activity. Abbr. ABB.Activity-based Costing: A costingsystem used to assign overhead costs tospecific items produced, by looking atspecific cost drivers. Abbr. ABC.Activity-based Management: A systemof management that uses activity-basedcost information for a variety ofpurposes including cost reduction, costmodeling and customer profitabilityanalysis. Abbr. ABM.Activity Chart: A plan showing workwhich has been done, made so that it canbe compared to a previous plan showinghow much work should be done.Activity Cost Pool: A grouping of allcost elements associated with an activity.Activity Driver: A type of cost driverwhich is used to quantify the activitiesinvolved in creating a product or service.Activity Driver Analysis: Theidentification and evaluation of theactivity drivers used to trace the cost ofactivities to cost objects. It may alsoinvolve selecting activity drivers withpotential to contribute to the costmanagement function with particularreference to cost reduction.

Act of God: Something you do notexpect to happen and which cannot beavoided, e.g. a storm or a flood.Actual: Real or correct.Actual Age: A method of calculating anapplicant's insurance age. This methoduses the insured's actual age and issometimes called Age Last Birthday orAttained Age.Actuary: An individual employed by aninsurance company to calculatepremium rates, reserves, dividends andother important figures using risk factorsobtained from experience tables.Actuarial Analysis: The technique ofcalculating the insurance premium andthe reserves required, using actuarialmethods. This involves mathematicalmodeling using the life expectancy ofthe population, the frequency ofhospitalization, the costs of healthcare,etc. All insurance company premiumsare usually based on actuarial analysis,but in India, because of the lack ofadequate data, this analysis is based on aweak foundation.Actual Cash Value: The amount ofmoney, less depreciation, that it wouldcost to replace something damagedbeyond repair with a comparable item.Actual Cost: The total cost ofproducing or buying an item, which mayinclude, e.g., its price plus the cost ofdelivery or storage.Actuarial Cost Method: A method thatdetermines contributions that would bemade under an insurance plan.Actual Total Loss: It is a loss where thegoods are completely lost and becomeirrecoverable.Actual Price: A price for a commoditywhich is for immediate delivery.Actual: Real figures.

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Actuaries: A professional usuallyinvolved in the life insurance industry,who applies mathematical theories ofprobabilities and statistical techniques inrisk calculation. Actuaries are becomingincreasingly involved in generalinsurance in relation to loss reservingand premium calculations.Actuarial Assessment of Employees:The employees of a company may beentitled to various benefits by way ofterminal dues at the time of retirement orresignation from the company. Example:Gratuity for those who have completed 5years of service, encashment of accruedleave at the time of retirement,commutation of pensionary benefits, etc.Even though these liabilities arise at thetime of retirement only, the employer isexpected to evaluate such futureliabilities by way of actuarial valuationand provide for the same in the currentyear’s accounts. Such provisions arecalled Actuarial assessment ofemployee’s liabilities.Actuarial Science: A branch ofknowledge which deals with mathematicsof insurance. It is used in the evaluationof various risks, premium fixationcommensurate with the risks and alsoprovisions relating to unexpired risks,unexpired liabilities, etc.Actuarial Tables: Lists showing howlong people are likely to live, used tocalculate life assurance premiums andannuities.Actuary: A person employed by aninsurance company or other organizationto calculate the risk involved in aninsurance, and therefore the premiumspayable by people taking out insurance.Add: To put figures together to make atotal.

Add up: To put several figures togetherto make a total.Add up to: To make a total of.Added Value: An amount added to thevalue of a product or service, equal tothe difference between its cost and theamount received when it is sold. Wages,taxes, etc. are deducted from the addedvalue to give the profit.Addition: 1. A thing or person added. 2.An arithmetical operation consisting ofadding together two or more numbers tomake a sum.Additional: Extra which is added.Additional Personal Allowance: A taxallowance which can be claimed by asingle person who has a child of schoolage living with them, formerly called the‘single- parent allowance’.Additional Perils: Sometimes calledSpecial Perils, these may include lossescaused by aircraft, explosion, earthquake,storm, tempest, flood, burst water pipes,riot, strike, civil commotion, maliciousdamage. These are extensions that widenthe scope of a basic fire insurance policy.Similar extensions may be available forother classes of insurance.Additional Premium: A payment madeto cover extra items in an existinginsurance.Additional Voluntary Contributions:Extra payments made voluntarily by anemployee to a pension scheme on top ofthe normal contributions, up to amaximum of 15% of gross earnings.Abbr. AVCs.Adequate Disclosure: A comprehensivepresentation of statistics in financialstatements, such that they can be used toinform investment decisions.


Adjudicate: To give a judgmentbetween two parties in law or to decide alegal problem.Adjudication of Bankruptcy: A legalorder making someone bankrupt.Adjudication Tribunal: A group whichadjudicates in industrial disputes.Adjudicator: A person who gives adecision on a problem.Adjust: To change something to fit newconditions.Adjustable Life Insurance: A form oflife insurance which allows the policyowner to change various benefits of thepolicy including the face amount, thepremium amount, the length of coverageand the length of the premium paymentperiod.Adjustable Rate Mortgage: Amortgage where the interest rate changesaccording to the current market rates.Abbr. ARM.Adjustable Rate Preferred Stock:Preference shares on which dividendsare paid in line with the interest rate onTreasury bills. Abbr. ARPS.Adjustable Policies: Often, thepremium on certain policies is basedupon estimates of the size of the risk.For example, turnover, gross profit oraverage stock value on your premisesover the next twelve months. Under anadjustable policy, these estimates can beadjusted appropriately, upwards ordownwards, at the end of the period ofinsurance, when the actual figures areavailable.Adjuster: A person who calculateslosses for an insurance company.Adjusting Entry: An entry in accountswhich is made to correct a mistake in theaccounts.

Adjustment: 1. An entry in accountswhich does not represent a receipt orpayment, but which is made to make theaccounts correct. 2. A change in theexchange rates, made to correct abalance of payment deficit.Administer: To organize, manage ordirect the whole of an organization orpart of one.Administered Price: A price fixed by amanufacturer which cannot be varied bya retailer.Administration: 1. The action oforganizing, controlling or managing acompany. 2. An appointment by a courtof a person to manage the affairs of acompany.Administration Costs or AdministrationExpenses: The costs of management, notincluding production, marketing, ordistribution costs.Administrative Receiver: A personappointed by a court to administer theaffairs of a company.Administrative Receivership: Theappointment of an administrativereceiver by a debenture holder.Administrator: 1. A person who directsthe work of other employees in abusiness. 2. A person appointed by acourt to manage the affairs of someonewho dies without leaving a will.Ad Valorem: 1. Used to describe a taxor commission, e.g., Value Added Tax,that is calculated on the value of thegoods or services provided, rather thanon their number or size. 2. Insurancepremium in respect of all propertyinsurance coverage is fixed mostly inrelation to the insured value of theproperty.Ad Valorem Duty: The duty calculatedon the sales value of the goods.

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Ad Valorem Tax: A tax calculatedaccording to the value of the goodstaxed.Additional Cover: An insurance policyextended to cover additional risk perilssuch as strikes, riots and civilcommotion, etc. on payment of extrapremium.Adjuster: A person who investigatesand settles losses for an insurance buyer.Adjusting: The process of settlinglosses with or by an insurance buyer.Administrator: An individual orprofessional organization, such as abank's trust department, appointed bythe court to administer an estate whenthe owner dies without having made awill or without nominating an executor.An executor may also be appointed ifthe named executor declines to serve.Advance: Money paid as a loan or as apart of a payment to be made later.Advance Payment Guarantee orAdvance Payment Bond: A guaranteethat enables a buyer to recover anadvance payment made under a contractor order if the supplier fails to fulfill itscontractual obligations.Adverse Balance: The deficit on anaccount, especially a nation’s balance ofpayments account.Adverse Opinion: An auditor’s reportthat a company’s financial statement isnot a fair representation of thecompany’s actual financial position.Adverse Selection: The tendency ofpersons with poorer-than-average healthexpectations (higher risk) to apply for orcontinue insurance coverage to a greaterextent than persons with average orbetter-than-average health expectations(lesser risk).

Adverse Variance: Variance whichshows that the actual result is worse thanexpected. Also called unfavourablevariance.Advice: A notification telling someonewhat has happened.Advisor: A person who suggests whatshould be done.Advisory Funds: Funds placed with afinancial institution to invest on behalfof a client, the institution investing themat its own discretion.Affiliated: Connected with or owned byanother company.Affiliated Enterprise or AffiliatedCompany: Company which is partlyowned by another (though less than50%), and where the share-owningcompany exerts some managementcontrol or has a close tradingrelationship with the associate.Aftermarket: A market in new shares,which starts immediately after trading inthe shares begins.After-tax Profit: A profit after tax hasbeen deducted.Age Analysis of Debtors: The amountowed by debtors, classified by age ofdebt.Aged Debtors Analysis or AgeingSchedule: A list which analyses acompany’s debtors, showing the numberof days their payments are outstanding.Age Change: The date on which aninsured's age changes. In most lifeinsurance contracts, this is the datemidway between the insured's birthdays.The date of age change depends onwhether the insurer uses an age nearestbirthday or age last birthday calculationfor determining premium rates.Age Last Birthday: A method ofcalculating an applicant's insurance age.


This method uses the insured's actualage and is sometimes called Actual Ageor Attained Age.Age Nearest Birthday: A method ofcalculating an applicant's insurance age.This method is based on a person'snearest birth date for rate calculations. Ifthe person's birth date is within the nextsix months, they are considered the nextage.Age Limits: Stipulated minimum andmaximum ages below and above whichthe company will not accept applicationsor may not renew policies. MostMediclaim policies in India have agelimits of 3 months to 70 years.Agency: 1. An office or job ofrepresenting another company in an area.2. An office or business which arrangesthings for other companies.Agency Bill: A bill of exchange drawnon the local branch of a foreign bank.Agency Broker: A dealer who acts asthe agent for an investor, buying andselling for a commission.Agency Worker: A person who isemployed by an agency to work foranother company. He or she is taxed asan employee of the agency, not of thecompany where he or she actually works.Agenda: A list of things to be discussedat a meeting.Agent: 1. A person who represents acompany or another person in an area. 2.A person in charge of an agency. 3. Anauthorized and licensed representative ofan insurance company who sells andservices insurance policies. Agentsrepresent the insurance company andtypically only sell policies from thatcompany.Agent’s Commission: Money, often apercentage of sales, paid to an agent.

Aggregate Demand: The total demandfor goods and services from all sectorsof the economy including individuals,companies and the government.Aggregate Limits: An aggregate totallimit on claims during a policy period,which applies in addition to a limit perclaim. Often this applies to liability andmedical policies.Aggregate Risk: The risk which a bankruns in lending to a customer.Aggravation of Risk: To make theexisting risk worse, more troublesome,etc.Aggregate Indemnity: The maximumamount that may be collected for anydisability or period of disability underthe policy.Aggregate Supply: All goods andservices on the market.AGI: Abbr. Adjusted Gross Income.AGM: Abbr. Annual General Meeting.Agreed: Having been accepted byeveryone.Agreed Value Policy: Policy whichundertakes to pay a specified amount incase of total loss. Under this case, thepolicy does not take into account thecurrent market value.Agreed Price: A price which has beenaccepted by both the buyer and seller.AIDS: Acquired Immune DeficiencySyndrome.AIM: Abbr. Alternative InvestmentMarket.Airmail Transfer: An act of sendingmoney from one bank to another byairmail.A List: A list of members of a companyat the time it is wound up, who may beliable for the company’s unpaid debts.

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All-in Price: A price which covers allitems in a purchase such as goods,delivery, tax or insurance.All-risks Policy: Coverage by aninsurance contract that promises to coverall losses, except those lossesspecifically excluded in the policy. Alsoknown as open peril coverage.All-in Rate: 1. A price which covers allthe costs connected with a purchase,such as delivery, tax and insurance, aswell as the cost of the goods themselves.2. A wage which includes all extrapayments such as bonuses and merit pay.Allocate: 1. To divide something invarious ways and share it out. 2. Toassign a whole item of cost, or ofrevenue, to a single cost unit, centre,account or time period.Allocated Costs: Overhead costs whichhave been allocated to a specific costcentre.Allocation: The process of providingsums of money for particular purposes,or a sum provided for a purpose.Allotment: 1. The process of sharingout something, especially moneybetween various departments, projects orpeople. 2. The act of giving shares in anew company to people who haveapplied for them.Allow: 1. To say that someone can dosomething. 2. To give. 3. To agree to oraccept legally.Allow for: To give a discount forsomething, or to add an extra sum tocover something.Allowable Charge: Charges for medicalservices or supplies provided by ahospital or physician which qualify ascovered expenses as stated in the healthplan's certificate of coverage.

Allowable Deductions: Deductionsfrom income which are allowed by theInland Revenue, and which reduce thetax payable.Allowable Expenses: Businessexpenses which can be claimed againsttax.Allowable Losses: Losses, e.g. on thesale of assets, which are allowed to beset off against gains.Allowance: 1. Money which is given fora special reason. 2. A part of an incomewhich is not taxed. 3. Money removed inthe form of a discount.Allowance for Bad Debt: A provisionmade in a company’s accounts for debtswhich may never be paid.Allowances Against Tax: Part ofsomeone’s income which is not taxed.All-risks Policy: An insurance policywhich covers risks of any kind, with noexclusions.Alternative Cost: Same as opportunitycost.Alternative Investment Market: ALondon stock market, regulated by theLondon Stock Exchange, dealing inshares in smaller companies which arenot listed on the main London StockExchange. Abbr. AIM.Ambulatory Services: Health careservices provided to patients who areable to return home without an overnightstay in a medical facility. Typically,ambulatory services include preventive,diagnostic, and treatment servicesprovided on an outpatient basis.Ambulatory Surgery: Intermediatelevel surgical procedures that usually aretoo complex to be performed in aphysician's office but do not requireinpatient hospitalization.


Amendment: A formal document whichcorrects or revises an insurance policy.When authorized by the insurer and thepolicy owner, the amendment attaches toor becomes part of the policy.Amortize: 1. To repay a loan by regularpayments, most of which pay off theinterest on the loan at first, and thenreduce the principal as the repaymentperiod progresses. 2. To depreciate or towrite down the capital value of an assetover a period of time in a company’saccounts.Amount Paid up: An amount paid for anew issue of shares, either the totalpayment or the first installment, if theshares are offered with installmentpayments.AMT: Abbr. Alternative Minimum Tax.Analysis: A detailed examination andreport.Analytical Review: An examination ofaccounts from different periods for thepurpose of identifying ratios, trends andchanges in balances.Angel: An investor in a company in itsearly stages, often looking for returnsover a longer period of time than aventure capitalist.Annual: For one year.Annual Accounts: The accountsprepared at the end of a financial year.Annual Depreciation: A reduction inthe book value of an asset at a particularrate per year.Annual Depreciation Provision: Anassessment of the cost of an asset’sdepreciation in a given accountingperiod.Annual Exemptions: The amount ofincome which is exempt from tax.

Annual General Meeting: An annualmeeting of all shareholders of acompany, when the company’s financialsituation is presented by and discussedwith the directors, when the accounts forthe past year are approved and whendividends are declared and audited.Abbr. AGM.Annual Income: Money receivedduring a calendar year.Annualized: Shown on an annual basis.Annualized Percentage Rate: A yearlypercentage rate, calculated bymultiplying the monthly rate by twelve.Abbr. APR.Annual Management Charge: Acharge made by the financial institutionwhich is managing an account.Annual Percentage Rate: A rate ofinterest (such as on a hire-purchaseagreement) shown on an annualcompound basis, and including fees andcharges. Abbr. APR.Annual Report: A report of acompany’s financial situation at the endof a year, sent to all the shareholders.Annual Return: An official reportwhich a registered company has to makeeach year to the Registrar of Companies.Annuitant: The person who will receiveannuity benefits at stipulated intervals oftime like yearly/half yearly/quarterly/monthly intervals.Annuity: Money paid each year to aretired person, usually in return for alump-sum payment. The value of theannuity depends on how long the personlives, as it usually cannot be passed onto another person. Annuities are fixedpayments, and lose their value withinflation, whereas a pension can beindex-linked.

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Annuity Certain: An annuity thatprovides payments for a specific numberof years, regardless of life or death ofthe annuitant.Annuity Contract: A contract underwhich a person is paid a fixed sumregularly for life.Antedate: To put an earlier date on adocument.Anti-dumping Duty: Same ascountervailing duty.Anti-inflationary: Restricting or trying.Anti-trust: Attacking monopolies andencouraging competition.APB: Abbr. 1. Accounting PrinciplesBoard. 2. Auditing Practices Board.Applicant: The person applying for theinsurance policy. The applicant may bedifferent from the proposed insured orthe policy owner.Application: 1. The act of asking forsomething, usually in writing, or adocument in which someone asks forsomething, e.g. a job. 2. Effort ordiligence.Application of Funds: Details of theway in which funds have been spentduring an accounting period.Apportion: To share out something, e.g.costs or funds.Appraisal: A calculation of the value ofsomeone or something.Appraise: To assess or to calculate thevalue of something or someone.Appreciation: 1. An increase in value.Also called capital appreciation. 2. Theact of valuing something highly.Appropriation: The act of puttingmoney aside for a special purpose.Appropriation Account: The part of aprofit and loss account which shows

how the profit has been dealt with, e.g.,how much has been given to theshareholders as dividends and how muchis being put into the reserves.Approval: The act of saying or thinkingthat something is good.Approve: 1. To think something is good.2. To agree to something officially.Approved Accounts: Accounts thathave been formally accepted by acompany’s board of directors.Approved Securities: State bondswhich can be held by banks to form partof their reserves.Approximately: Not quite exactly, butclose to the figure shown.APR: Abbr. Annualized PercentageRate.AR: Abbr. Accounts Receivable.Arbitrage: The business of making aprofit from the difference in value ofvarious assets, e.g. by selling foreigncurrencies or commodities on onemarket and buying on another at almostthe same time to profit from differentexchange rates, or by buying currenciesforward and selling them forward at alater date, to benefit from a difference inprices.Arbitrage Syndicate: A group ofpeople who together raise the capital toinvest in arbitrage deals.Arbitration: The settling of a disputeby an outside party agreed on by bothsides.Arbitrator: A person not concernedwith a dispute who is chosen by bothsides to try to settle it.Arson: The willful and maliciousburning of property, often with criminalintent.ARD: Abbr. Accounting Reference Date.


Area Manager: A manager who isresponsible for a company’s work in aspecific part of the country.Arithmetic Mean: A simple averagecalculated by dividing the sum of two ormore items by the number of items.ARM: Abbr. Adjustable Rate Mortgage.Around: 1. Approximately. 2. Apremium or discount.ARPS: Abbr. Adjustable Rate PreferredStock.Arrangement Fee: A charge made by abank to a client for arranging creditfacilities.Arrears: Money which is owed, butwhich has not been paid at the right time.Article: A section of a legal agreementsuch as a contract or treaty.Articles of Association: A documentwhich lays down the rules for acompany regarding such matters as theissue of shares, the conduct of meetingsand the appointment of directors.Articles of Incorporation: Same asmemorandum and articles of association.Articles of Partnership: Same aspartnership agreement.A Share: Ordinary shares with limitedvoting rights or no voting rights at all.Asked Price: A price at which acommodity or stock is offered for saleby a seller, also called ‘offer price’.Assess: To calculate the value ofsomething or someone.Assessor: Person who estimates thevalue of goods for the purpose ofapportioning the sum payable by theunderwriters to settle the claims. Alsocalled as Surveyor.

Assessed Value: A value that is theresult of calculation by someone such asan auditor or investment advisor.Assignee: Assignee is the person towhom the benefits under a life policyare assigned.Assignment: The legal transfer of oneperson's interest in an insurance policyto another person.Assessment: A calculation of value.Asset: 1. Something which belongs to acompany or person, and which has avalue. 2. Calculating the value of acompany on the basis of the value of itsassets (as opposed to a valuation on anearnings or dividend yield basis).Asset-backed Securities: Bondssecured against specific assets.Asset Backing: A support for a shareprice provided by the value of thecompany’s assets.Asset-rich Company: Company withvaluable tangible assets, such asproperty, which provide firm backingfor its shares.Assets: All items of property thatcontribute to the value of anorganization, including tangible itemssuch as cash, stock and real estate, aswell as intangible items such asgoodwill.Asset Stripper: A person who buys acompany to sell its assets.Asset Stripping: The practice of buyinga company at a lower price than its assetvalue, and then selling its assets.Asset Turnover: A measure of acompany’s efficiency that is the ratio ofsales revenue to total assets.Asset Turnover Ratio: The number oftimes assets are turned over by salesduring the year, calculated as turnover

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divided by total assets less currentliabilities.Asset Value: The value of a companycalculated by adding together all itsassets.Assign: 1. To give something tosomeone by means of an official legaltransfer. 2. To give someone a job ofwork to do and make him or herresponsible for doing it.Assignation: A legal transfer.Assignee: A person who receivessomething which has been assigned tohim or her.Assignment: The legal transfer of aproperty or right.Associate: 1. A person or companylinked to another in a takeover bid. 2. Atitle given to a junior member of aprofessional organization. Seniormembers are usually called ‘fellows’.Associated Company: A companywhich is partly owned by anothercompany (though less than 50%), whichexerts some management control over itor has a close trading relationship with it.Associate Director: A director whoattends board meetings, but has not beenelected by the shareholders.Assumable Mortgage: A mortgagewhich can be passed to another person.Assurance: A type of insurance whichpays compensation for an event that iscertain to happen at some time,especially for the death of the insuredperson. Also called life assurance, lifeinsurance.Assure: To insure someone, orsomeone’s life, so that the insurancecompany will pay compensation whenthat person dies.

Assurer or Assuror: An insurer or acompany which insures.Assured: Party indemnified or promisedto be indemnified against loss by meansof insurance.ATM: Abbr. Automated Teller Machine.At Sight: Immediately, when it ispresented.Attachment: The act of holding adebtor’s property to prevent it frombeing sold until debts are paid.Attachment of Earnings: A process inwhich a court uses its legal authority toobtain directly from a person’s salary,money that the person owes to the court.Attachment of Earnings Order: Acourt order to make an employer paypart of an employee’s salary to the courtto pay off debts.Attachment Order: An order from acourt to hold a debtor’s property toprevent it from being sold until debts arepaid.Attained Age: The age of an individualon a given date. Some insurancecompanies use attained age as a methodof calculating insurance premiums.Attending Physician's Statement(APS): Information provided by aproposed insured's physician coveringmedical history and results of medicalexaminations. It is used to determine theappropriate underwriting classificationfor the proposed insured.Attest: A formal statement, e.g. astatement by an auditor that acompany’s financial position is correctlystated in the company’s accounts.Attributable Profit: A profit which canbe shown to come from a particular areaof the company’s operations.


Auction: 1. A method of selling goodswhere people who want to buy competewith each other by saying how muchthey will offer for something, and theitem is sold to the person who makes thehighest offer. 2. A method of sellinggovernment stock, where all stock onissue will be sold, and the highest priceoffered will be accepted, as opposed totendering to sell something at an auction.Auctioneer: The person who conductsan auction.Audit: The examination of the booksand accounts of a company.Audit the Stock: To carry out a stockcontrol, in front of witnesses, so as toestablish the exact quantities and valueof stock.Audit Committee: A committee of acompany’s board of directors thatmonitors finances, on which companyexecutives cannot sit.Audit Cycle: The interval betweenaudits.Audited Accounts: A set of accountsthat have been thoroughly scrutinized,checked and approved by a team ofauditors.Auditing Standards: Guidelines,established by an authoritative body,that auditors should follow whenexamining financial statements andother information.Auditor: A person who audits.Auditors’ Report: A report written by acompany’s auditors after they haveexamined the accounts of the company.Also called audit report.Audit Risk: The risk that auditors maygive an inappropriate audit opinion onfinancial statements.Audit Trail: The records that show allthe stages of a transaction, e.g. a

purchase, a sale or a customer complaint,in the order in which they happened.Authorize: 1. To give permission forsomething to be done. 2. To givesomeone the authority to do something.Authorized Capital: The amount ofcapital which a company is allowed tohave, as stated in the memorandum ofassociation.Authorized Share Capital: The amountof capital that a company is authorizedto issue in the form of shares.Automated Screen Trading: A systemwhere securities are bought, sold andmatched automatically by computer.Abbr. AST.Automatic Non Forfeiture Mode(ANM): An option available onspecified unit linked policies, where thepolicy holder can choose to discontinuehis premium payments after havingmade premium payments regularly for atleast three years and the fund value inthe main account is sufficient to coverthe policy charges. In such cases, the lifecover of the policy remains as is, in spiteof the premium payments beingdiscontinued.Average: 1. A number calculated byadding several figures together anddividing by the number of figures added.2. The sharing of the cost of damage orloss of a ship between the insurers andthe owners.Average Adjuster: Independent expertwho assesses the liabilities of thevarious parties to a common maritimeadventure and to classify the variousitems of expenditure between generaland particular average, ship, Freight andcargo.Average Out: To come to a figure as anaverage.

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Average Cost of Capital: An averagefigure for the cost of borrowing or thecapital raised by selling shares.Average Due Date: The average datewhen several different payments fall due.Average income per capita: Same asper capita income.Aviation Hazard: The increased risk ofdeath or injury resulting fromparticipation in aviation, usually as apilot. The presence of aviation hazardwill often result in extra premium or theexclusion of certain benefits.

Avocation: This refers to either anoccupation or an activity the insuredparticipates in.Avoidance: A right which can beexercised by an underwriter to relievehim of liability under the policy becausethe assured has been guilty of a breachof good faith or where the risk in voyagepolicy has failed to attach within areasonable time after the underwriterwrote the risk.Award: Something given by a court,tribunal or other official body, especiallywhen settling a dispute or claim.

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2 Dictionary of Insurance

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