The dollar amount of premium charged by an insurance company per unit of coverage provided. A premium rate comprises all components of cost to the insurer, including the cost of the risk itself, commissions, underwriting costs, operating expenses and a profit margin. In auto insurance, the unit of coverage is normally $100, in which case the total premium is equal to the amount of coverage divided by $100 and multiplied by the rate.
The individual or entity recognized by the relevant state as the person to whom notices can be legally served with respect to a business which operates in the state. Every state (with the technical exception of Pennsylvania) requires that a business which operates in the state must have a registered agent domiciled in the state. In some states the registered agent can be the business itself, but typically it is a third party, and often one which specializes in providing registered agent services. Registered agents must be open at all times during regular business hours for the service of notices. Depending on the state, registered agents can also be known as resident agents and statutory agents, although the former has dual meaning with respect to insurance. A resident insurance agent is one who is domiciled in the state in which the agent conducts insurance business (in contrast to a non-resident agent).
Insurance of the risks of an insurance company by another company (a reinsurance company). Reinsurance is a method which insurance companies use to share and to spread risk across a number of otherwise unrelated entities. Reinsurance companies charge their insurance company clients a percentage of the premiums they collect, often on a quota share basis, and in return accept a proportionate risk for the coverage provided. Reinsurance enables insurers to accept risks which they may be unwilling to bear on their own, and in so doing provides depth to the insurance market.
A Latin and legal term which means “the fact speaks for itself”. It is invoked in negligence lawsuits when the very circumstances of the case demonstrate that negligence must have occurred, without the need to prove the fact of negligence by means of the usual legal principles. For example, in Woosley v. State Farm Ins. Co., 117 Nev. 182, 18 P.3d 317 (2001), the plaintiff (Mr. Woosley) successfully established negligence by invoking res ipsa loquitur after he was injured when his vehicle hit a ladder which had fallen from an unknown driver’s truck. He could not establish negligence conventionally, as he did not know how the ladder was able to fall from the truck, but he argued that a ladder falling from a truck presupposes negligence. The fact that the ladder was able to fall from the truck spoke for itself.
The cancellation of an insurance policy by the insurer from outset, commonly due to a misrepresentation by the insured at the time at which the policy was applied for. For example, an insurer could rescind an auto insurance policy if it discovers that the insured failed to advise it of prior DUI convictions. When an insurer rescinds a policy, it does so in writing to the insured and it refunds all premiums paid by the insured. This is consistent with the essence of rescission which is to declare that the contract never existed in the first place.
A formal term given to the analysis and control of the risks to which an organization is exposed. Risk management involves identifying the nature and extent of those risks which have the potential to significantly affect an organization’s operations, profitability or existence. Having identified those risks, it is then concerned with how best to mitigate those risks, if indeed the organization chooses to not be fully exposed to one or more of those risks. The conventional strategies for controlling risk consist of avoiding the risk altogether, reducing the magnitude or scope of the risk, and transferring part or all of the risk through insurance contracts or other means. The remaining risks to which an organization is exposed, after avoiding, reducing or transferring risks, are referred to as retained risks. Sometimes an organization intentionally retains risk in order to leave open the potential rewards which the risk can generate. Learn more about risk management.