Glossary of insurance terms
Technical terms relating to insurance and IT – explained in a nutshell
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Agile processes are becoming more and more established in the professional sphere. For this to work, work itself must also adapt. Agile onboarding is about teaching participants basic concepts and best practices of agile approaches. This makes it easier for them to get started on agile software development. Learn more about agility for the insurance sector by clicking here.
API stands for application programming interfaces. So API management refers to the management of the use of interfaces. This involves analytics, access control, monetisation and developer workflows. Click here for more information on this topic.
The term ‘assurance’ refers to individual insurance companies whose services customers draw on to insure their risks. (Specialist term for the insurance industry and specific insurance companies.)
Asset liability management
Asset liability management (ALM) comprises the management of the asset and liability side of the balance sheet. In particular, the risk capacity, risk propensity and other interdependencies must be taken into account.
Assistance services cover supplementary advisory and information services that offer policyholders immediate support in emergency situations. This includes services such as telephone counselling after a traffic accident or a car breakdown. Click here to find out more about claims management.
Augmented reality (AR) is a computer-based representation that enriches the real world with virtual features, resulting in a fusion of reality and virtual reality. Click here for an application scenario.
In the insurance industry, this is understood to be the sum of several individual losses that accrue within the scope of a loss event.
Artificial intelligence (AI) is the ability of a machine application to mimic natural intelligence. This means that ‘machines’ are put in a position where they can make decisions that correspond to human judgement. Find out here how AI changes the perspective.
In insurance, the term broker pool refers to the collective use of certain resources. A broker pool combines the business of numerous insurance brokers.
Broker management program
The broker management program enables brokers to connect to insurers’ IT systems and to manage and transfer data. The basic functions, such as viewing documents and contracts, managing data or communicating digitally with customers, reduce manual work and thus free up time.
The German Federal Financial Supervisory Authority (BaFin) has the task of supervising credit and financial services institutions, insurance companies and securities trading as well as representing German interests in the EU and other international bodies. Click here to find out how to implement the BaFin requirements in a targeted manner based on the example of emergency and business continuity management.
BiPRO e.V. (abbreviation for Brancheninstitut für Prozessoptimierung, Industry Institute for Process Optimisation) is a neutral organization of the financial services industry where insurance companies, sales partners and service providers work together to optimise cross-company business processes. Technical and professional standards are developed in so-called projects. To learn more about BiPRO, click here.
Commencement of insurance (formal, material and technical)
Experts refer to the formal start of insurance as the point in time when the contract is legally binding for both parties.
The material commencement of insurance is the point in time from which the insurance company assumes insurance cover for insured events that have occurred.
The technical start date of the insurance is the date stated in the insurance application. In this case, it may be agreed that the policyholder must pay an insurance premium or contribution from that time.
The set of conditions contains the general terms and conditions of an insurance contract. This includes, among other things, clauses imposed on the customer by an insurance company when concluding an insurance contract, irrespective of personal circumstances. This is comparable to a framework contract, which is drawn up by insurance companies in accordance with the law and case law to form the legal basis for insurance contracts. For example, framework agreements, such as the payment of premiums or the provision of services, are made in the individual insurance contracts.
Customer identity and access management (CIAM) refers to the creation and central administration of online identities of customers in the context of digital corporate touchpoints. Insurance companies have been faced with the challenge of creating and managing their customers’ online identities in order to improve the digital customer relationship. A central CIAM integrated into the application landscape can make a valuable contribution here. Click here to learn more about the topic.
Churn prediction, also known as churn forecasting, is a type of advanced analysis. It provides information about which customers are at risk of moving on to the competition. This makes it possible to take targeted measures to prevent highly effective and efficient redundancies. The prediction is based on machine learning and artificial intelligence algorithms that use customer data to predict future churn. Click here to learn more about churn prediction with the use of AI.
A cloud or cloud computing is the Internet-based provision of storage capacity, computing power or application software as a service. Before a company can draw on this service, it needs to develop a suitable cloud strategy. Click here to learn more about your path to the cloud.
Compliance is the observance of various rule sets and regulations by an organisation, its units and employees. A flawless compliance organisation not only avoids liability claims against company managers, but also helps to identify significant liability risks that pose an existential threat to the company at an early stage and to reduce the risk of damage to the corporate image. Click here to find out how you can proactively control your risks.
Customer relationship management
Customer relationship management (CRM) describes a targeted approach for systematically shaping relationships and interactions between an organisation and its existing and potential customers. CRM systems can help companies stay in touch with customers, optimise processes and increase profitability. Click here for more insights into the topic.
In credit business, the borrower (old creditor) is the cedent who transfers the creditor’s rights as security to the lender (new creditor). In the insurance industry, cedants are the principal insurers or reinsurers who cede their insured or reinsured risk shares to the reinsurers in return for premiums.
The customer experience is the sum of all experiences a customer has with a company or brand. It comprises the subjective evaluation of the customer’s experience at the various touchpoints along the customer journey. An adesso study on customer experience in the insurance industry can be found here. (only in German)
The term customer journey describes the path taken by a potential customer along various touchpoints with a product, brand or company until he or she performs a desired target action. There are various ways of what this path can look like. An example of linking technology and customer experience to guide the customer journey can be found here.
Cyber risks refer to threats and attacks that occur via modern information and communication technologies. Most of the attacks target databases and IT systems. Additional cyber insurance can cover damage caused by hacker attacks or other cybercrimes. Click here to find out how you can protect your company from cyber attacks.
All types of property insurance and accident insurance that cover property and liability risks are referred to as composite insurance.
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Digital designers design and optimise digital products, systems and services. In doing so, they need to harmonise the wishes and needs of the users with economic framework conditions and technological constraints. Click here to find out more about the role of a digital designer.
Digital account book
The digital account book helps the customer (for example, the insured person) to analyse and categorise his or her transactions. Click here to learn more about the potential this offers to the insurance industry.
Digital pension overview
The digital pension overview will allow citizens to access bundled information on statutory, occupational and private old-age provision via an Internet-based portal. Click here for more information on the topic.
An insurance company that operates without an insurance agent or broker is called a direct insurer. These companies sell their products online, by telephone or by post, in other words, via ‘remote selling’, thus saving commission costs and brokerage fees.
Duty to provide initial information
When insurance brokers contact a potential new client for the first time, they must provide information about their identity and the nature and scope of their activities in a clear and comprehensible form. This includes, among other things, the precise broker status, contact details and the name of the ombudsman. The legal basis for the initial information is laid down in the Insurance Mediation Ordinance.
The European Insurance and Occupational Pensions Authority (EIOPA) works to improve regulatory convergence, strengthen consumer protection and preserve financial stability for the benefit of economies, businesses and EU citizens.
Elastic IT for insurers
An elastic infrastructure makes it possible to expand or reduce processor, memory and storage resources as required. This allows the insurer to react dynamically to peak loads without having to plan for fixed IT operating costs in the long term. Click here for more insights into the topic.
Electronic confirmation of insurance
An electronic confirmation of insurance (elektronische Versicherungsbestätigung, eVB) is proof of statutory motor vehicle liability insurance issued by an insurance company
for a motor vehicle operated in road traffic. Insurers are obliged to send the insurance confirmation to the registration authority electronically. When changing providers, the new insurer must immediately send an electronic confirmation of insurance for transmission (eVBÜ) to the vehicle registration office.
Electronic advertising consent
Until now, insurers have obtained consent for their advertising activities in paper format. Digital solutions for automated customer journeys make this process easier and more sustainable. These solutions generate electronic advertising consent, consent to insurers’ privacy statements and registrations for apps and portals on a large scale. Click here to learn more about this topic.
Embedded insurance enables insurance companies to offer their products and services via digital platforms or at the digital point-of-sale of third-party providers. This allows them to reach new customers, generate additional turnover and ‘embed’ themselves in external value chains. Click here to learn more about this topic based on an example from the bancassurance context.
In a digital ecosystem, participants act on the basis of mutual benefits that arise from joint cooperation in the ecosystem. An ecosystem offers insurers the opportunity to engage directly with customers while they are in an environment that is beneficial to them. The specific insurance product is integrated into the overall offer. Click here for more information on the role of insurance in ecosystems.
In the insurance industry, the expense ratio refers to the ratio between the expenses for insurance operations and insurance benefits and the premiums.
The fund balance is the total value of all fund shares. The value of the shares results from the surrender value.
Forum V (North Bavarian Institute for Insurance Science and Economics at the Friedrich Alexander University of Erlangen-Nuremberg) is an association of universities, associations and North Bavarian insurance companies. The association fosters the cooperation of science, business and politics in the field of insurance.
Many insurers are confronted with the problem of insurance fraud. This refers to the fraudulent receipt of insurance benefits. Fraud detection systems help to identify and contain suspected cases. For more information on how to effectively combat insurance fraud and abuse, click here.
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German Act to Strengthen Occupational Pensions
The Act to Strengthen Occupational Pensions (BRSG) is a German tax and social law reform package passed in 2017 to foster the spread of occupational pension provisions. The regulation on employer subsidies laid down in the BRSG applies to all newly concluded occupational pension contracts via the implementation channels pension fund, pension plan and direct insurance. Learn here what this means for the IT systems you use to handle your occupational pension provision processes.
German Insurance Association
The German Insurance Association (GDV) is the national umbrella organisation of private insurers. The focus is on risk protection, security and financial precaution in all areas of private and public life.
German Sustainability Network
The German Sustainability Network (GSN) offers the insurance industry and all associated stakeholders a platform for discussing topics relating to sustainability. adesso is a focus partner in the German Sustainability Network.
The injured party is someone who has suffered damage. It does not matter whether the injury pertains to damage to persons, property or assets. The injured person has a right to compensation.
The International Financial Reporting Standards (IRFS) are global uniform accounting standards for companies. They include new accounting practices as well as new regulatory requirements. IFRS 17 applies to insurance companies listed on a stock exchange or that have a listed parent company.
InsurLab Germany e.V. is an InsurTech initiative that brings together science and public institutions with start-ups and insurance companies. The organisation’s goal is to jointly transform the German insurance industry through digitalisation and to redesign and advance business models.
The insurance consultant advises third parties on the conclusion, amendment or review of insurance contracts or on the assertion of claims arising from insurance contracts without receiving an economic benefit from an insurer or being dependent on it in any other way. In addition, an insurance consultant can represent policyholders against an insurance company out of court.
The Interaction Room is a method for determining requirements. It brings together stakeholders from different application domains, helping to establish a common understanding of project goals and content at an early stage. Click here for more information on this.
Insurance Distribution Directive
The Insurance Distribution Directive (IDD) is designed to standardise the EU Single Market and improve consumer protection by qualifying brokers and through other measures. Click here to learn how you can overcome the resulting challenges with intelligent end-to-end solutions.
The insurance broker arranges the insurance contract, mainly between the insurance company and policyholder.
The insured person is the person to whom the agreed insurance cover for the personal or property risk applies. This can be the policyholder, but a third party can also be named as the insured person.
An insurance agent is a person who is commissioned by an insurer to broker or conclude an insurance contract in a commercial manner. Acting as a self-employed tradesperson, the agent concludes contracts with the policyholder on behalf of the insurance company as required and assists with their administration and implementation.
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The term life insurance refers to insurance policies that cover biometric risks such as death or disability. In addition, there are also insurance policies that primarily serve the purpose of private old-age provision – what are called
endowment life insurance policies. Another form of life insurance is unit-linked life insurance. It consists of a separate capital investment and a traditional life insurance policy. The savings process takes place through an investment, and the premiums are invested in investment funds.
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A major claim compounds all exceptionally high property damage, personal injury or financial loss defined by a loss amount set by the insurer.
New Players Network
The New Players Network is an initiative of Versicherungsforen Leipzig with the aim of promoting knowledge transfer between insurance companies and start-ups. Furthermore, the network strengthens the cooperation between all market participants and supports and advises start-ups in the early development phase.
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Personalized customer communication
In the digital age, customers expect communication that is tailored to their needs across multiple channels. Modern platforms and technologies are required to meet these expectations. The benefits include increased engagement of (potential) customers, improved brand image and efficient workflows. Click here for an example of a software solution that can be used to realise personalised customer communication.
The pension fund is a pension scheme for the employees of a company as part of the corporate pension scheme.
The pension commitment is one form of occupational pension provision. The supervisor invests company funds for the employee towards the purpose of financing the pension. As a rule, the employee does not have to pay in anything.
The EU PSD2 (Payment Services Directive 2) regulates payment services and payment service providers both in the EU and throughout the EEA (European Economic Area). Furthermore, it is intended to increase the security of payment transactions in the insurance industry. Click here to learn more about this topic.
With a primary insurer, an insurance contract is concluded between the end customer (natural or legal persons) and the insurer. Reinsurers serve the opposite purpose.
The policyholder is the person (natural or legal) who has concluded the insurance contract with the insurer.
Policy issuing refers to the issuance of an insurance certificate by the insurer.
The essential function of the statutory pension insurance is to compensate for the loss of earned income in retirement. The pension amount is primarily determined on the basis of the contribution payments made by the pension recipient over the course of his or her working life. Another type of pension insurance is the unit-linked pension insurance. Savers can invest a large part of the premiums in types of investments such as investment funds and shares. Insured persons can achieve a higher return compared to the traditional variant.
Phone bots can help insurers to provide customers with information quickly. At the same time, the customer service is relieved without requiring the insured person to use a new contact channel. The bot offers 24/7 self-service and conducts voice-based interaction with customers. Simple enquiries are answered directly, while complex requests are pre-classified and forwarded to the relevant specialist department. Click here to learn more about the advantages of this technology.
Party causing damage
The person who caused the damage must compensate the injured party. In the worst case, the party that caused the damage will be liable for the entirety of his or her private assets.
The German Riester pension helps to build up a private pension and has the advantage that it is subsidised by the federal government. Insured persons are entitled to a basic annual allowance and a child allowance for each child eligible for child benefit. In addition to federal subsidies, there may also be tax incentives. Frequently cited points of criticism are the high administrative requirements, the prescribed contribution guarantee, which significantly reduces the return opportunities of Riester products, and the system of deferred taxation.
Risk capital is a technical term from life insurance and indicates the difference between the sum insured and the actuarial reserve. Risk capital decreases continuously over time.
Risk assessment is a procedure for assessing the risk of a policyholder or insurance contract before commencement of the contract term. Risk assessment is also the process starting with the application by the policyholder and ending with the acceptance of the insurance contract by the insurance company. Click here to learn more about risk assessment in the insurance industry.
The reinsurer is an insurance company that reduces or decreases the claims burden of primary insurers in exchange for premiums.
Reinsurance is the transfer of insured risks from one insurance company to another. In general, this is understood to mean the insurance of an insurance. Click here for an example of how reinsurance can be supported by a CRM system.
The government-subsidised Rürup pension (also called a basic pension) is used by contributors to make provisions for old age in Germany. The contributions to a Rürup pension are tax-deductible, but the payouts are taxed in retirement.
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Settlement costs are expenses (fees, salary shares) of insurance companies used by supervisors and freelance experts on site to assess the damage and determine the claim payment as well as to negotiate this with the policyholder in the case of a major loss.
If the policyholder decides to terminate the contract prematurely, the insurer pays the surrender value.
The sales funnel refers to the process a prospect undergoes with a company until they become a customer. The sales funnel is divided into several stages, and with each stage the potential customer moves one step closer to the purchase decision. A well-defined sales funnel provides insight into the measures the company must take at any stage to take potential customers to the next stage.
In the insurance industry, solvency refers to an insurance company’s capital resources. These serve to cover risks of the insurance business and thus secure the claims of policyholders or creditors even in the event of unfavourable developments. The higher the solvency, the better the claims are secured.
Solvency II is a project of the European Union that aims to harmonise insurance supervisory law and at the same time bring it into line with the regulatory provisions of credit institutions. It represents a regulatory system that is neutral in terms of competition and is based on a complex model that allows for the comprehensive and realistic mapping of the overall solvency of an insurance company. In particular, it reorganised the solvency capitalisation, business organisation and disclosure obligations of insurance companies.
A systematically structured sales architecture enables insurers to manage communication with end customers across all channels, and it provides the infrastructure for integrating brokers in the best possible way. Click here for additional information on sales architectures.
Separation of insurance lines
In the insurance industry, the separation of lines of business is a general principle. According to the Insurance Supervision Act (Versicherungsaufsichtsgesetz, VAG), insurance companies that are active in the life or substitutive health insurance business are not allowed to operate other insurance classes, such as property and accident insurance. Thus, life insurance, health insurance as well as property and casualty insurance must be operated in companies that are independent of one another. Reasons for separating the lines of business include transparency, use of premiums and benefits exclusively for the respective line of business (no means of cross-subsidisation), cost distribution based on causation and bankruptcy protection.
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The Insurance Supervisory Requirements for IT (Versicherungsaufsichtlichen Anforderungen an die IT, VAIT) are regulatory requirements of BaFin that apply to all insurance companies under its supervision. Click here for more information on this.
Versicherungsforen Leipzig promotes research and development in the insurance industry. The company inspires and motivates the insurance industry to transfer knowledge and cooperate, thus providing access to the largest independent German-speaking industry network. Versicherungsforen Leipzig not only develops sustainable concepts, but also creates solutions: tools, start-ups, cooperations and implementation support.
Virtual reality (VR) is the perception of reality in a virtual environment that can be experienced with special software and hardware. The aim of VR is to allow the viewer to immerse themselves in a simulated world and navigate it. As a result, direct interaction between the user and the virtual environment takes place. Click here for exciting insights into new VR learning environments for insurers.
In the insurance industry, a waiting period is a period of time specified in the contract. It spans from the conclusion of the insurance to the time from which the insured party is entitled to benefits.
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