Chapter 39: Glossary Flashcards
Accrual rate
The rate at which rights build up for each year of service in a defined benefit scheme
Accrued benefits
The benefits for service up to a given point in time, whether vested rights or not. They may be calculated in relation to current earnings or projected earnings. (Allowance may also be made for revaluation and/or pension increases required by the scheme rules or legislation.)
Accumulation of risk
An accumulation of risk occurs when a portfolio of business contains a concentration of risks that might give rise to exceptionally large losses from a single event. Such an accumulation might occur by location (property insurance) or occupation (employers’ liability insurance), for example.
Acquisition costs
Costs arising from the writing of insurance contracts including:
1. direct costs, such as acquisition commission or the cost of drawing up the insurance document or including the insurance contract in the portfolio
2. indirect costs, such as advertising costs or the actuary’s / underwriter’s expenses connected with the establishment of the premium rating table.
Active member
A member of a benefit scheme who is at present accruing benefits under that scheme in respect of current service
All risks
A term used where the cover is not restricted to specific perils such as fire, storm, flood etc. The cover is for loss, destruction or damage by any peril not specifically excluded. The exclusions will often be inevitabilities such as wear and tear. The term is sometimes loosely used to describe a policy that covers a number of specified risks, though not all
Anti-selection
People will be more likely to take out contracts when they believe their risk is higher than the insurance company has allowed for in its premiums. This is known as anti-selection.
Anti-selection can also arise where existing policyholders have the opportunity of exercising a guarantee or an option. Those who have most to gain from the guarantee or option will be the most likely to exercise it.
