Reference
Key terms and definitions for independent insurance agencies and anyone evaluating agency management software.
A nonprofit standards organization that maintains standardized forms and data exchange standards used throughout the insurance industry. ACORD forms — such as the ACORD 125 (Commercial Insurance Application) and ACORD 25 (Certificate of Liability Insurance) — provide a common format for transmitting policy, claims, and certificate data between agencies, carriers, and MGAs.
A billing arrangement where the insurance agency collects the premium from the insured and remits the carrier's portion after deducting its commission. This contrasts with direct bill, where the carrier bills the insured directly. Agency bill gives agencies more control over cash flow but adds the responsibility of premium collection and remittance.
Software used by insurance agencies to manage clients, policies, commissions, documents, and daily operations. A modern AMS replaces spreadsheets and disconnected tools with a single platform that supports the full agency workflow — from prospect intake through policy servicing and renewal.
An insurance carrier that has granted an agency an appointment — a formal agreement authorizing the agency to write business on the carrier's behalf. Appointment requirements typically include minimum production volumes, E&O coverage, and licensing in the applicable states.
The authority granted by a carrier to an agency or MGA allowing them to accept (bind) risks on the carrier's behalf without prior approval on each individual policy. Binding authority agreements specify the types of risks, coverage limits, and geographic territories the agent is authorized to bind.
The total collection of policies and client accounts managed by an agency or individual producer. Book of business metrics — such as total written premium, policy count, retention rate, and loss ratio — are key indicators of agency health and value.
A detailed report submitted by an agency or MGA to a carrier listing individual risks, premiums, claims, or losses for a given period. Bordereaux reports are commonly required by carriers for delegated authority arrangements and surplus lines placements.
A document issued by an agency on behalf of the insured that provides a summary of coverage to a third party — such as a landlord, general contractor, or lender. A COI confirms that specific coverage is in force but does not modify the underlying policy terms.
The process of tracking, documenting, and managing insurance claims from initial notice through resolution. In an agency context, claims management involves recording first notice of loss, coordinating with the carrier's claims department, and keeping the insured informed throughout the process.
The division of commission revenue between two or more parties — typically between the agency and a producing agent, or between a house account and a servicing CSR. Commission split structures vary by agency and are usually defined by producer agreements.
A bonus commission paid by a carrier to an agency based on the profitability or volume of the business the agency placed with that carrier over a specified period. Contingent commissions (also called profit-sharing or bonus commissions) are typically calculated annually based on metrics like loss ratio, premium growth, and retention.
Software designed to manage contacts, track sales interactions, and nurture prospect relationships. While a CRM handles general sales pipeline management, it lacks insurance-specific features like policy tracking, ACORD form generation, and commission reconciliation that an AMS provides.
An agency employee who handles day-to-day policy servicing, including endorsements, certificate requests, billing inquiries, and claims intake. CSRs are the primary point of contact for existing clients and play a critical role in client retention.
A formal refusal by an insurance carrier to provide coverage for a submitted risk. Declinations are a required part of the diligent search documentation when placing business with a surplus lines carrier.
The process of documenting that an agency attempted to place coverage with admitted carriers before resorting to a surplus lines carrier. Most states require a diligent search — typically involving a minimum number of declinations from admitted carriers — before surplus lines placement is permitted.
A billing arrangement where the insurance carrier sends premium invoices directly to the insured and collects payment, then pays the agency's commission separately. Direct bill reduces the agency's collection burden but also means the agency does not control the billing relationship.
Professional liability insurance that protects an agency against claims arising from mistakes, oversights, or negligent acts in the course of providing insurance services. Carriers typically require agencies to maintain E&O coverage as a condition of appointment.
Insurance coverage provided by non-admitted carriers for risks that admitted (standard market) carriers are unwilling or unable to write. Surplus lines placement is regulated at the state level and requires compliance with diligent search, filing, and tax requirements.
A unique nine-digit number assigned by the IRS to identify a business entity for tax purposes. In insurance, the FEIN is commonly used to identify commercial clients and is a required field on many commercial applications and policy records.
A commercial insurance coverage that protects businesses against claims of bodily injury, property damage, and personal or advertising injury arising from their operations, products, or premises. General liability is one of the most commonly written commercial lines coverages.
A phase of the insurance market cycle characterized by rising premiums, tighter underwriting standards, reduced capacity, and fewer carriers willing to write certain classes of business. During a hard market, agencies may need to approach more carriers or turn to surplus lines markets to place coverage.
A broad term for technology companies and products that aim to modernize or improve the insurance industry through software, data analytics, AI, and digital distribution. Insurtech solutions range from full agency management systems to specialized tools for quoting, underwriting, or claims processing.
A category of insurance coverage, such as general liability, commercial auto, workers' compensation, or property. Agencies typically track production, commissions, and loss ratios by line of business to understand which coverage types drive their revenue and where they have concentration risk.
The ratio of incurred losses to earned premiums, expressed as a percentage. A loss ratio of 60% means that for every dollar of premium earned, 60 cents was paid out in claims. Loss ratios are a key profitability metric used by carriers to evaluate agency performance and calculate contingent commissions.
A report provided by a carrier that details an insured's claims history over a specified period — typically three to five years. Loss runs include claim dates, descriptions, amounts paid, and reserves. They are essential for underwriting and are commonly required when submitting risks to new carriers.
An intermediary that has been granted delegated underwriting authority by one or more carriers. MGAs can bind coverage, issue policies, and sometimes handle claims on behalf of the carrier. Agencies submit risks to MGAs when the MGA offers access to markets or programs not available through direct carrier appointments.
A nonprofit organization that operates an electronic database and processing system for insurance producer licensing. NIPR enables producers and agencies to apply for and renew licenses across multiple states through a single portal, and agencies use it to verify that their producers hold valid licenses.
The process of tracking and maintaining policy records throughout their lifecycle — from binding through endorsements, audits, renewals, and cancellations. Effective policy management in an AMS ensures that coverage details, premium amounts, and key dates are always current and accessible.
A lending arrangement where a third-party finance company pays the insured's premium to the carrier upfront, and the insured repays the finance company in installments with interest. Premium financing is commonly used for commercial policies with large annual premiums.
A licensed insurance agent or broker who sells insurance products and brings new business to the agency. Producers are typically compensated through commission splits and may be evaluated on metrics like new business production, retention rate, and total book size.
The process by which an insurance carrier submits its proposed rates, rating rules, and supporting actuarial data to a state insurance department for review and approval. Rate filings are required before a carrier can use new rates in most states.
The process of extending an existing insurance policy for a new term when the current policy period expires. Renewal management involves reviewing coverage, re-marketing if necessary, presenting options to the client, and issuing the renewed policy before expiration.
The percentage of policies or clients that renew with the agency from one policy period to the next. Retention rate is one of the most important metrics for agency valuation and long-term profitability. A typical well-run agency targets a retention rate above 90%.
A phase of the insurance market cycle characterized by lower premiums, relaxed underwriting standards, increased carrier capacity, and greater competition among carriers for business. Agencies generally find it easier to place coverage during a soft market.
A package of information — including applications, loss runs, supplemental questionnaires, and supporting documents — sent by an agency to a carrier or MGA for the purpose of obtaining a quote on a new or renewal risk.
Insurance coverage placed with non-admitted carriers for risks that the standard (admitted) market cannot adequately cover. Surplus lines transactions are subject to state-specific regulations including diligent search requirements, surplus lines taxes, and filing obligations.
A statutory insurance coverage that provides wage replacement and medical benefits to employees who are injured or become ill in the course of employment. Workers' compensation is mandatory in nearly all states and is one of the most common commercial lines coverages.
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