IADLs

See instrumental activities of daily living.

IASC

See International Accounting Standards Committee.

IBNR claims

See incurred but not reported claims.

ICD

See International Classification of Diseases and Related Health Problems.

illegal occupation provision

An individual health insurance policy provision which states that the insurer will not be liable for any loss that results from the insured’s committing or attempting to commit a felony or from the insured’s engaging in an illegal occupation.

illustration

As defined by the National Association of Insurance Commissioners (NAIC) Life Insurance Illustrations Model Regulation in the United States, a life insurance sales presentation or depiction that portrays nonguaranteed values of a life insurance policy, portrays these values over a period of years, and is shown to a potential customer.

illustration actuary

In the United States, an insurance company employee or a consultant hired by an insurer who meets requirements specified in the Life Insurance Illustrations Model Regulation and who is responsible for ensuring that the scales used to calculate the nonguaranteed values in the insurer’s life insurance sales illustrations meet the requirements of the Model Regulation.

illustration of net cost

In a proposal for group insurance, an explanation of rates that typically covers two or more years and shows possible future ratings and premiums, provided the group’s claim experience stays within the parameters assumed for the insurance product.

immediate annuity

An annuity under which periodic income benefit payments are scheduled to begin one annuity period after the contract’s issue date. Contrast with deferred annuity. See also annuity period.

immediate expense recognition

In accounting, an expense recognition concept, which states that a company must recognize all costs as expenses during the current accounting period.

immediate participation guarantee (IPG) contract

A type of group annuity contract used to fund employee retirement benefits that does not guarantee a minimum investment return or provide full guarantees against investment loss. Under this type of plan, the insurer places the plan assets in an investment account in the name of the plan sponsor, and plan assets share in the gains or losses relating to the activities of investing and paying pension benefits. When a plan participant retires, the plan sponsor may withdraw funds to purchase an immediate annuity for that retiree or the monthly retirement benefit may be paid directly from the investment account to the retiree. See also deposit administration contract.

impairment

For insurance underwriting purposes, any aspect of a proposed insured’s present health, medical history, health habits, family history, occupation, or other activities that could increase that person’s expected mortality risk.

impairment guide

A document that insurance sales agents use when gathering information about a proposed insured that lists common impairments and the probable underwriting decision for proposed insureds who have these types of impairments. See also impairment.

impairment rider

An amendment to an insurance policy that excludes from coverage any loss that arises from a specified disease or physical impairment, or concerns a specific body part. Also known as impairment waiver and exclusion rider.

impairment waiver

See impairment rider.

IMR

See interest maintenance reserve.

IMSA

See Insurance Marketplace Standards Association.

income date

The date on which an insurer begins or is scheduled to begin making annuity benefit payments under an annuity contract. Also known as maturity date and annuity date.

income protection insurance

A type of disability income coverage that provides an income benefit both, while the insured is totally disabled and unable to work and while he is able to work, but because of a disability, is earning less than he earned before being disabled. Also known as residual disability insurance.

income replacement table

For disability income coverage, a table that presents the limits on the amount of disability income insurance—usually expressed as an amount of monthly benefit—an insurer will issue based on an applicant’s earned income.

income statement

A financial document that provides information on a business organization’s revenues and expenses during a specified period and indicates whether the business experienced a net income or net loss during the period. Also known as statement of operations.

income tax

A tax that is levied on income that a person or business earns.

Income Tax Act

A Canadian law that encourages the creation of private pension plans by according favorable tax treatment to plans registered with Revenue Canada.

incontestability provision

An insurance and annuity policy provision that limits the time within which an insurer has the right to avoid the contract on the ground of material misrepresentation in the application for the policy. Also known as incontestable clause. See also contestable period and time limit on certain defenses provision.

increasing term life insurance

A type of term life insurance that provides a death benefit that increases by some specified amount or percentage at stated intervals over the policy term. Contrast with decreasing term life insurance.

incremental cost

See marginal cost.

incurred but not reported (IBNR) claims

In the United States, insurance claims that were incurred during an accounting period but that have not been reported to the insurer as of the Annual Statement date.

indemnity benefits

Contractual benefits that are based on the actual amount of financial loss. In traditional medical expense insurance plans, insureds are reimbursed for the covered medical expenses they incur up to a maximum dollar amount. Also known as reimbursement benefits.

indemnity reinsurance

A type of reinsurance used to effect, in most cases, a partial transfer of business and to form a basis for sharing the risks of the insurance business. Contrast with assumption reinsurance. See also reinsurance.

independent audit

See external audit.

independent insurance agent

A licensed sales professional who is not under contract to one insurer but is authorized to market the products of a number of companies.

indeterminate premium life insurance policy

A type of nonparticipating whole life policy that specifies two premium rates—both a maximum guaranteed rate and a lower rate. The insurer charges the lower premium rate when the policy is purchased and guarantees that rate for at least a stated period of time, after which the insurer uses its actual mortality, interest, and expense experience to establish a new premium rate that may be higher or lower than the previous premium rate. Also known as nonguaranteed premium life insurance policy and variable-premium life insurance policy.

index

A statistical measurement system that tracks the performance of a group of similar investments.

index-number trend analysis

See trend analysis.

indirect cost

In accounting, a cost that cannot be physically traced to one specific product, line of business, department, or other cost object. Also known as overhead costs. Contrast with direct cost.

Individual Accident and Sickness Insurance Minimum Standards Act

In the United States, a National Association of Insurance Commissioners (NAIC) model law that establishes minimum standards for all individual health policies other than Medicare supplement policies.

individual cession administration

A method of reinsurance administration in which the assuming company administers the reinsurance and bills the ceding company for the individual lives reinsured. The ceding company provides the assuming company with detailed information about individual policies and informs the assuming company of any changes that affect the reinsurance.

individual insurance policy

An insurance policy that is issued to insure the life or health of a named person. Some individual policies also provide insurance coverage for the named person’s immediate family or a second named person. Contrast with group insurance.

individual level cost allocation methods

Pension plan valuation methods that measure costs for individual participants and sum the individual costs to obtain costs for the plan as a whole. Also known as individual level-premium cost methods. Contrast with aggregate level cost allocation methods.

individual level-premium cost methods

See individual level cost allocation methods.

individual policy pension trust

A type of allocated pension plan funding arrangement under which plan trustees purchase individual level premium annuity contracts for each member of the plan. See also allocated pension funding contract.

individual practice association (IPA) model

A type of open panel health maintenance organization (HMO) that contracts with an association of physicians, known as an IPA, that agrees to provide services for the HMO’s subscribers. See also open panel HMO.

individual retirement account

See individual retirement arrangement (IRA).

individual retirement annuity

In the United States, an individual deferred annuity that qualifies for favorable federal income tax treatment because it meets requirements specified in the federal tax laws for individual retirement arrangements. See also individual retirement arrangement (IRA).

individual retirement arrangement (IRA)

In the United States, a retirement savings plan that allows people with earned income to deposit a portion of that income in a tax-deferred savings arrangement that is established by an individual and that meets certain requirements specified in the federal tax laws, including a requirement that the trustee of the trust account be a bank, insurance company, or other financial institution. See also Keogh plan.

individual stop-loss coverage

A type of stop-loss insurance coverage purchased by self-insured employers that provides benefits to the employer when a health claim is in excess of a stated amount. Also known as specific stop-loss coverage. See also aggregate stop-loss coverage.

industrial insurance

A form of life insurance characterized by (1) death benefits of $2,000 or less, (2) a weekly or monthly premium payment schedule, (3) the collection of renewal premiums at the policyowner’s home by an agent, and (4) minimum underwriting requirements. Although industrial insurance is no longer a popular insurance product, the home service distribution method that was used to sell industrial insurance is still used today to sell a variety of insurance products. Also known as debit insurance. See also home service distribution system.

inflation

An increase in the average price level of goods and services during a specified period.

inflation protection rider

A long-term care (LTC) policy rider that either automatically increases the benefit amount by a specified percentage each year, or allows the insured to opt for a higher daily benefit at specified intervals during the lifetime of a policy, without having to show evidence of insurability. See also long-term (LTC) insurance.

inflation risk

The risk that the average price level of goods and services will increase during a specified period.

informal contract

A contract that is enforceable because the parties to the contract met requirements concerning the substance of the agreement rather than requirements concerning the form of the agreement. For example, an oral contract is an example of an informal contract. Contrast with formal contract.

information systems

The function within a business organization that facilitates data processing and enables the resulting information to be made available to employees who need it. Also known as information technology.

inside director

A member of a business organization’s board of directors who holds a position with the company in addition to the position on the board. Contrast with outside director.

insolvency

(1) The inability of a business organization to pay its financial obligations as they come due. (2) For an insurer, the inability to maintain capital and surplus above the minimum standard of capital and surplus required by law.

inspection report

A type of investigative consumer report that is developed by a consumer reporting agency for an insurer to use during the underwriting process. The inspection report is compiled from public records and sometimes from interviews with the proposed insured; and contains information about a proposed insured’s lifestyle, occupation, and financial status. Contrast with investigative consumer report.

installment certificate

A document that is given to the beneficiary of a life insurance policy that describes how a life insurance policy’s proceeds are to be paid under a settlement option. See also settlement option.

institutional advertising

A form of advertising that promotes an idea, a philosophy, an organization, or an industry, rather than a specific product or service.

instrumental activities of daily living (IADLs)

In long-term care (LTC) insurance, activities that require higher levels of functional ability than basic activities of daily living and provide an indication of whether a person is able to function independently at home. The IADLs include the ability to use a telephone, use transportation services, shop for groceries, prepare meals, perform housework tasks, and take medicine as directed by a prescribing physician. See also activities of daily living (ADLs).

insurable interest

In insurance, a person exhibits an insurable interest in a potential loss if that person will suffer a genuine economic loss if the event insured against occurs. Without the presence of insurable interest, an insurance contract is not formed for a lawful purpose and, thus, is not a valid contract.

insurance

A mechanism for transferring the risk of financial loss from events such as fire, accident, illness, or death from an individual or entity to an insurance company.

Insurance Act

In Canada, a general statute that contains most of the insurance law of a com­mon law province and that regulates the conduct of insurers and insurance agents within the province.

insurance agent

A person who is authorized by an insurance company to represent that company in its dealings with applicants for insurance. Also known as sales agent. Contrast with broker. See also captive agent.

insurance broker

See broker.

insurance commissioner

In the United States, the individual who is responsible for directing the operations of a state insurance department. Also known as superintendent of insurance and director of insurance.

Insurance Companies Act

The Canadian legislation that sets out federal insurance laws and the regulatory system for federally regulated life insurance companies.

insurance fraud

Any fraud that involves an insurance company, whether committed by consumers, insurance company employees, agents, health care providers, or anyone else connected with an insurance transaction.

Insurance Fraud Prevention Model Act

In the United States, a National Association of Insurance Commissioners (NAIC) model law that promotes the full utilization of the expertise of the insurance commissioner to investigate and discover fraudulent insurance acts, halt fraudulent insurance acts, and assist and receive assistance from state, local, and federal law enforcement and regulatory agencies in enforcing laws prohibiting fraudulent insurance acts.

Insurance Holding Company Acts

Laws in effect in most states that control and monitor acquisitions of insurance companies. According to these laws, any company proposing to acquire control of an insurer must file with that insurer’s home state a comprehensive application for approval and allow regulators to routinely monitor the members of holding company systems so as to guard against inappropriate transfers of funds.

Insurance Information and Privacy Protection Model Act

In the United States, a National Association of Insurance Commissioners (NAIC) model act that establishes standards for the collection, use, and disclosure of information gathered in connection with insurance transactions. Also known as NAIC Model Privacy Act.

insurance leverage ratio

A financial ratio used to measure an insurer’s debt burden in relationship to the resources it has available to support the debt burden. The ratio compares an insurer’s contractual reserves with its capital and/or surplus.

Insurance Marketplace Standards Association (IMSA)

In the United States, an independent, voluntary association of insurance companies formed to promote high ethical standards in advertising, sales, and service of individual life insurance and annuity products. IMSA’s program incorporates a set of ethical principles, a code of ethics, and a program of self-assessment and independent assessment that enables insurance companies to monitor their own compliance with regulatory requirements. See also market conduct and market conduct laws.

insurance producer

See insurance agent.

Insurance Regulatory Information System (IRIS)

A system established and operated by the National Association of Insurance Commissioners (NAIC) in the United States to monitor the financial condition of insurers for the purposes of detecting financial distress and preventing insolvency.

insurance risk

See C-2 risk (pricing risk).

insured

A person whose life, health, property, or income is insured by an insurance policy.

insurer

The insurance company assuming the risk under an insurance contract.

insurer-administered group plan

A group insurance plan for which the insurer is responsible for handling the administrative and record-keeping aspects of the plan. Contrast with self-administered group plan.

insurer’s illustrated scale

According to the National Association of Insurance Commissioners (NAIC) Life Insurance Illustrations Model Regulation in the United States, a schedule of nonguaranteed elements based on the insurer’s recent experience that is included in a sales presentation for life insurance.

intangible asset

In accounting, an asset representing ownership of a legal right or other nonphysical resource. Contrast with tangible asset.

interest

Money paid for the use of money. See also compound interest and simple interest.

interest-adjusted cost comparison index

A cost comparison index used to compare life insurance policy costs that takes into account the time value of money. By comparing the index numbers derived for similar life insurance policies, a consumer has some basis on which to compare the costs of the policies. See also net payment cost comparison index and surrender cost comparison index.

interest first rule

In the United States, a federal rule governing the taxation of annuities, which states that any amount the contract owner takes out of an annuity will be considered a withdrawal of the interest (which has not been taxed), until the contract owner has withdrawn all of the interest in the contract. Also known as earnings first rule.

interest-indexed policy

A universal life insurance policy that provides for interest credits to be linked to an external standard, typically the Standard & Poor’s 500 (an index based on 500 select stocks).

interest maintenance reserve (IMR)

For insurers in the United States, an Annual Statement account that absorbs the realized capital gains and losses in an insurer’s asset portfolio caused by changes in interest rates.

interest margin

The difference between the interest rate an insurer earns on its investments and the interest rate the insurer credits to a product or assumes when pricing the product. Also known as investment margin, interest spread, and spread.

interest option

A life insurance policy settlement option under which the insurer invests the policy proceeds for the policy beneficiary or policy payee and the interest earned is periodically paid out annually, semiannually, quarterly, or monthly. See also settlement options.

interest rate

The percentage by which an amount of money is multiplied to derive the amount that is paid for the use of that money; often expressed in decimal form.

interest-rate risk

See C-3 risk.

interest-sensitive insurance

A general category of insurance products in which the face amount and/or the cash value vary according to the insurer’s investment earnings.

interim insurance agreement

See temporary insurance agreement (TIA).

interim insurance law

A judicial interpretation of conditional premium receipts that generally holds that, if an insurance agent has accepted a premium payment, a proposed insured is covered until the insurer notifies the proposed insured that coverage has been terminated and returns the premium.

intermediate nursing care

In long-term care (LTC) insurance, nursing care provided on less than a 24-hour basis, usually rehabilitative in nature.

internal accounting records

Accounting records designed for financial reporting to company management, whose main interest is in having appropriate data for making decisions.

internal audit

An examination of a company’s records, policies, and procedures that is conducted by the company’s own employees to ensure that service standards are met, data recorded in the company’s files is accurate and complete, and established procedures are being followed. Contrast with external audit.

internal customer

A company employee who receives service from other employees of the company. Contrast with external customer.

internal rate of return (IRR)

In investments, the percentage rate at which an asset’s earnings must be discounted, using present value techniques, in order to exactly repay the initial investment in the asset. For investments in insurance products, also known as return on investment (ROI).

internal replacement

See replacement.

Internal Revenue Service (IRS)

A part of the United States Department of the Treasury that is responsible for enforcing the provisions of laws and regulations concerning income taxes in the United States.

International Accounting Standards Committee (IASC)

An organization charged with promulgating accounting standards that are applicable internationally, independent of the home country of the company’s financial statements.

International Classification of Diseases and Related Health Problems (ICD)

One of the most commonly used codes for medical diagnoses, generally referred to as the ICD. See also diagnostic and treatment codes and Physician’s Current Procedural Terminology (CPT).

interpleader

In the United States, a procedure under which an insurance company that cannot determine which claimant is entitled to receive insurance policy proceeds may pay the proceeds to a court and ask the court to decide the proper recipient. See also payment of insurance money into court.

intoxicants and narcotics provision

An individual health insurance policy provision which states that the insurer will not be liable for any loss resulting from the insured’s being under the influence of alcohol or any narcotic unless taken on the advice of a physician.

inventory

In accounting, an itemized count and listing of a company’s assets, such as property, products, materials, or securities.

invested assets

The debt securities, equity securities, and derivative securities purchased to generate earnings.

investigative consumer report

A type of consumer report that is used during the underwriting process and that is prepared by obtaining information from the consumer’s neighbors, friends, associates, and others who have knowledge of the consumer’s character, general reputation, personal characteristics, or mode of living. Contrast with inspection report.

investing

The practice of employing a principal sum of money—usually to purchase assets or place a sum on deposit—to generate earnings so that the principal sum will increase in value.

investment

Any expenditure of money or assets made in an attempt to earn a profit of some type.

investment adviser

A firm or individual who is compensated for providing advice to investors about the value of securities or the advisability of buying and selling securities.

Investment Adviser’s Act of 1940

In the United States, a federal law that regulates the conduct of investment advisers.

investment companies

Entities that issue securities and engage primarily in investing and trading securities.

Investment Company Act of 1940

In the United States, a federal law that regulates the activities of investment companies.

investment facility contract

See separate account contract.

investment forecast

An estimate of the performance of bonds, stocks, mortgages, and other invested assets a company owns.

investment-grade bond

A bond that has been rated by a major investment advisory firm as having a low probability of default.

investment margin

See interest margin.

investment segmentation method

An insurance accounting method for allocating investment income by which an insurer uses the cash flows of a product line or line of business to purchase specific investments for that line.

Investments of Insurers Model Act (Defined Limits Version)

In the United States, a National Association of Insurance Commissioners (NAIC) model law that specifies the types of assets that insurers are permitted to treat as admitted assets on their Annual Statements. It also requires the board of directors of each insurer subject to the law to adopt a written investment plan and to supervise and direct the insurer’s investment function.

investment year method

See new money method.

invitation to inquire

An insurance advertisement that is designed to induce the audience to inquire further about a specific insurance policy and that contains only a brief description of the coverage provided by the policy.

IPA model

See individual practice association model.

IPG contract

See immediate participation guarantee contract.

IRA

See individual retirement arrangement.

IRIS

See Insurance Regulatory Information System.

IRIS ratios

Financial ratio tests used to determine which insurance companies should have their Annual Statements scrutinized. See also Insurance Regulatory Information System (IRIS), analytical phase of IRIS, and statistical phase of IRIS.

IRR

See internal rate of return.

irrevocable beneficiary

A life insurance policy beneficiary who has a vested interest in the policy proceeds even during the insured’s lifetime because the policyowner has the right to change the beneficiary designation only after obtaining the beneficiary’s consent. Contrast with revocable beneficiary.

IRS

See Internal Revenue Service.

IRS Form 1099

In the United States, a federal tax form that insurers and other entities must provide to certain individuals who received taxable income in the previous tax year. Form 1099 shows the amount and type of disbursement, the taxable amount, and the amount of tax withheld. This information must also be provided to the Internal Revenue Service (IRS) and appropriate state tax authority.

IRS Form 5498

In the United States, a federal tax form insurers must provide to annuity contract owners by May 31 of each year for each individual retirement annuity. Form 5498 shows the fair market value of the annuity and the amount and type of contributions made to the annuity during the previous tax year. The insurer also provides the information on the form to the Internal Revenue Service (IRS) and state tax authority.

issue strain

See surplus strain.

LOMA's Glossary of Insurance and Financial Services Terms Copyright © 2002 LOMA (Life Office Management Association, Inc.). Used with permission from the publisher. All right reserved. Copying or downloading this information without permission from the publisher is a violation of federal and international law. For information on purchasing a copy of the Glossary or for additional information on LOMA and its educational programs, visit LOMA's Web site at www.loma.org. LOMA is a registered service mark of the Life Office Management Association, Inc.