Insurance industry of United Stated is very much different from any other country and also it is the largest market in terms of premium amount according to federal Insurance Office (2014) Report. Insurance industry of US is regulated by each state individually means it is a state based insurance regulatory system.
In general Insurance means “risk transfer”. Here we have two sides, one is insurer (the insurance Carrier) and another is insured (the person who is taking the insurance from insurer).
Synonyms of terms
Insurance Provider -> Insurer, insurance company or insurance Carrier
Insurance Buyer -> Insured or policyholder
Normally we choose to take insurance to avoid any financial loss. Nowadays we can buy insurance for almost anything in the world, so that if any mishappening occurs with it, that will not result in a financial loss for us.
Insurance Carrier : A Company that provide insurance products. (insurance Carrier)
Customer : A person that buys insurance for anything (insured, sub insured)
Personal Customer: An individual person that buys insurance.
Commercial Customer: A Company who needs to buy insurance for its products and any entity that it wants to be insured.
Insurance Agency: A Company that works between Insurance Carrier and its Customer to provide insurance products to Customer and to provide insurance policies to the Carrier and earn some commission from Carrier either via Agency Bill or by Direct Bill
Broker : This term is used for a person who either works between insurance carrier and the Customer or works between insurance agency and customer to provide insurance products to Customer and to bring new insurance policies to the Carrier/Agency and earn some commission.
Producer/Agent: He/She is the employee of insurance agency who deals directly with the customer either on fixed salary or gets commission for those policies on which he/she works for the agency.
Naic (National Association of Insurance Commissioners) Code: It is a unchangeable code for each carrier. There is a different naic code for different Line of business for each insurance Carrier that’s why each insurance Carrier can’t provide every type of insurance policy to its customer. It can sell only those type (line of business type) of policy whose naic code it has.
Here we’ve two terms:
Writing Carrier : A child carrier (of a larger insurance carrier) which has the naic code associated to it and who actually does the insurance for the customer.
Parent Carrier: It is a Group/Parent of writing Carrier.
Line of business : this term defines the type of policy means the policy is for which type of industry like:
Boiler and Machinery
A customer can have two types of policies:
Agency Bill : In this type of policy customer deals with the agency and not with the Carrier. In agency bill policy commission is taken before paying premium to the carrier.
Direct Bill : In this type of policy the customer directly deals with the insurance Carrier and pays premium to carrier. The carrier then transfers the appropriate commission amount to the insurance agency of that policy.
Vendor: This term is used for any company or person from which the insurance agency or insurance carrier buys some services/products. Vendor examples are builder, electrician, carpenter etc. This is important in insurance accounting.