Like every industry, the insurance industry has special terms we use to describe aspects of our business. This glossary can help newcomers to the industry learn terminology and help seasoned industry experts keep up-to-date.
ACORD – ACORD is a non-profit international organization that provides data and information exchange standards to insurance industry stakeholders. It is dedicated to advancing the global insurance industry through improved efficiency and data accuracy, and it provides tools and resources to its members to help them address current business and technology challenges. ACORD produces and maintains standardized forms used by insurance companies, brokers, agents and software vendors, as well as certificates of insurance and other data exchange standards.
ACORD Insurance Certificate – An ACORD insurance certificate is a standardized document issued by an insurance provider that provides proof of a contractor, vendor, supplier, or tenant’s liability insurance coverage. The insurance certificate summarizes key elements of the policy, including types of coverage, policy numbers, policy limits, and effective and expiration dates of the coverage. The certificate is used to show any third party that the business is protected from common risks required by the business.
Aggregate Limit – The maximum amount that the insurance company will pay for all claims during the policy period. This limit is typically expressed in dollars. For example, a COI may show an aggregate limit of $5M. This means that the insurance company will pay up to $5M for all claims that are filed during the policy period, regardless of the number of claims. The aggregate limit is an important piece of information to know, because it tells you how much protection you have in the event of a major loss. If the total amount of your claims exceeds the aggregate limit, you will be responsible for paying the difference out of pocket.
Authorized Representative – A person who is authorized by the insurance company to sign the certificate on its behalf. This person is typically a licensed insurance agent or broker, but it may also be an employee of the insurance company, such as an underwriter or claims adjuster. The authorized representative is responsible for ensuring that the information on the certificate is accurate and complete. They must also attest to the fact that the insurance policy is in effect and that the policyholder is in good standing. The signature of an authorized representative is an important part of any certificate of insurance. It helps to ensure that the certificate is valid and that the policyholder is properly insured.
Certificate Audit – A certificate audit is the process of verifying the accuracy and validity of Certificates of Insurance (COI) submitted by contractors, suppliers, vendors, and tenants to organizations they are doing work for. It can either done manually by an audit team or conducted using COI tracking software that compares the information on the submitted COIs to the required information. The audit is done to ensure that the COIs are current and valid, and that the organization is protected in the event of any legal action. It is an important part of risk management, and helps to ensure that the organization is not exposed to any unnecessary liabilities.
Certificate Holder – a person or organization to whom the certificate is being provided as evidence of insurance.
Certificate of Insurance – A Certificate of Insurance (COI) is a document issued by an insurance carrier or its authorized agent that outlines the details of an insurance policy, including the policyholder’s name, effective date, coverage limits, and type of coverage. This document is often requested by companies that use contractors, vendors, suppliers, and tenants when engaging in business transactions, as it provides proof of insurance status and helps to reduce liability. It can also serve as a useful tool to protect businesses from potential losses due to changing project scopes or third-party liability.
Commercial General Liability (CGL) Coverage – A type of business insurance that protects businesses from a variety of claims, including bodily injury, property damage, personal injury, and more. CGL policies typically cover the cost of accidental damages and legal costs associated with defending a suit, but do not cover intentional damages or accidents involving automobiles, aircraft, or watercraft. Companies can also add other companies or individuals they contract with as “additional insureds” to their policy.
COI Tracking Software – Certificate of Insurance Tracking Software is a risk management platform used by companies to automate the collection and management of certificates of insurance from contractors, vendors, suppliers, and tenants. The software provides features such as OCR technology for compliance verification, automated tracking & renewal requests, risk insights & analysis reporting, and more. By using such a platform, companies can increase compliance percentages, streamline processes, and reduce manual data entry.
Contractor Management Software – Contractor management software is a digital tool used to manage the entire process of hiring and managing contractors, from pre-screening to onboarding to managing contract terms and ensuring compliance. It includes features such as automated background checks, document storage, contract management, and contractor performance tracking. Certificate of Insurance (COI) tracking software can be used as part of contractor management software to automate the tracking and verification of COIs from vendors, ensuring that businesses are meeting their insurance requirements.
Description of Operations – A brief summary of the work that the insured will be performing. The description of operations is important because it helps the insurance company to understand the risks that the insured is facing. This information is used to determine the appropriate coverage and premium for the policy. It should include the types of work that will be performed, the locations where the work will be performed, and any special equipment or materials that will be used. Examples include, general contracting, electrical work, and plumbing work.
InsurTech – Insurtech is the use of technology to make the insurance industry more efficient and effective. It includes the use of software to streamline processes such as underwriting, claims management, and customer service, as well as the use of blockchain technology, artificial intelligence, and machine learning. One particular area of insurtech is certificate of insurance (COI) tracking software. This software allows businesses to quickly and easily track, manage, and verify their certificates of insurance, making sure they are compliant with requirements and up-to-date.
Insurance Policy – An insurance policy is a legally binding agreement between an insurer and a policyholder, in which the insurer promises to pay for losses caused by perils covered under the policy language in exchange for a premium payment. It outlines the exact terms and conditions of coverage, including limits, duration, and premium amounts, and typically contains four sections: declaration page, insuring agreement, exclusions, and conditions.
Insurance Tracking – Insurance tracking is the process of identifying, verifying, and monitoring insurance documents associated with third-party vendors to ensure they meet an organization’s risk and compliance requirements. It involves collecting, analyzing, and updating data to ensure that all third-party insurance information is up-to-date, accurate, and compliant.
Limits of Insurance – The maximum amounts that the insurance company will pay for a covered claim. These limits are typically expressed in terms of dollars per occurrence and dollars in the aggregate.
- Per occurrence limit: This is the maximum amount that the insurance company will pay for a single claim.
- Aggregate limit: This is the maximum amount that the insurance company will pay for all claims during the policy period.
Notice of Cancellation – A written notification from the insurance company to the certificate holder that the insurance policy is being cancelled. This notice is typically sent by mail, but it may also be sent electronically. The notice of cancellation must state the reason for the cancellation and the effective date of the cancellation. It must also state the certificate holder’s rights under the policy, such as the right to a refund of any unearned premium.
Optical character recognition (OCR) is a technology that uses artificial intelligence (AI) to convert images of text into machine-readable text. AI is used to train OCR models to recognize various fonts, handwriting styles, and other variations in text and places them in a format and order for insurance professionals to efficiently consume content (e.g., insurance certificates).
Policy – The written contract of insurance.
Policy Expiration Date – The date on which the insurance policy expires. This date is typically located at the top of the COI, below the name and address of the insurance company. The policy expiration date is an important piece of information to know, because it tells you when your coverage will end. If you allow your insurance policy to expire, you will no longer be protected in the event of a claim. It is important to note that the policy expiration date on a COI may be different from the date on which you receive the COI. This is because COIs are typically issued for a period of one year, but insurance policies can be for longer or shorter periods of time.
Policy Form – The type of insurance policy that is being provided. The policy form will identify the specific coverages that are included and excluded under the policy. (ex. Commercial general liability (CGL), Commercial auto liability, Workers’ compensation)
Policy Limit – The maximum amount a policy will pay, either overall or under a particular coverage.
Producer – A producer is an insurance agent or broker who issued the certificate. The producer is responsible for ensuring that the information on the COI is accurate and complete, and that the certificate holder is properly insured. The producer’s signature on the COI is an important part of the certificate. It helps to ensure that the certificate is valid and that the certificate holder has the coverage that they need.
Quote – An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.
RIMS – The Risk and Insurance Management Society (RIMS) is an industry association of risk managers. It provides resources to its members in the form of periodicals, seminars, and an annual conference. It also offers a variety of products and services such as Contractual Risk Transfer, Practical Risk Management, The Risk Report, Exposure Survey Questionnaire, Guidelines for Insurance Specifications, IRMI Insurance Checklists, and 101 Ways To Cut Business Insurance Costs to help risk managers make and implement decisions that minimize the adverse effects of accidental business losses.
Waiver of Subrogation – A provision that states that the insurance company will not pursue legal action against a third party who is responsible for causing damage to the insured’s property. This provision is often required by contractors and other businesses as a way to protect themselves from being sued by their tenants, subcontractors, consultants, etc.