Business Glossary

Core Insurance Concepts

Term	Definition	Example
Policy	A contract specifying coverage details, premium, and terms between insurer and customer	Policy #123456789 provides $250,000 HEALTH coverage for 12 months at $489/year
Premium	Amount customer pays for insurance coverage, calculated from coverage amount, risk factors, age, and discounts	$100,000 coverage: Base $400 + Risk $50 - Discounts $20 + Tax $34 + Fee $25 = $489 annual
Deductible	Amount customer pays before insurance coverage begins; tracks annually and resets at renewal	$1,000 deductible; customer paid $600; next claim applies remaining $400 deductible
Copay/Coinsurance	Percentage of costs customer pays after deductible is met (default 20%)	After deductible, customer pays 20% copay on $1,000 = $200
Out-of-Pocket Maximum	Maximum amount customer pays per year; insurance covers 100% after reaching this limit	$5,000 OOP max protects customer from catastrophic costs
Coverage	Maximum dollar amount insurance will pay for covered losses during policy term	$500,000 coverage means insurance pays up to that amount for covered expenses
Claim	Formal request for payment from insurance company for a covered loss	Medical claim for $2,500; after $500 deductible and 20% copay, insurance approves $1,600
Risk Score	Calculated value (0-100) representing actuarial risk based on age, lifestyle, health, occupation	28-year-old office worker, non-smoker = 10 points = LOW risk profile
Fraud Score	Calculated value (0-100) indicating likelihood of fraudulent claim based on frequency, amount, provider, patterns	Claim with inactive provider (+30), high amount (+15), frequent claims (+25) = 70 = Investigation
Rider	Optional add-on providing additional coverage or modifying policy terms	Accidental death rider added to life policy during renewal

Risk and Pricing Terms

Term	Definition	Example
Risk Profile	Classification of customer risk level based on total risk score	Score 0-29: LOW, 30-69: MEDIUM, 70-100: HIGH
Underwriting	Process of evaluating application, assessing risk, and calculating premium rates	Application from 22-year-old for $300,000 health coverage passes underwriting after low-risk assessment
Base Rate	Starting premium percentage by insurance type before adjustments	HEALTH: 0.4%, LIFE: 0.2%, AUTO: 0.8%, PROPERTY: 0.3%, DENTAL: 0.15%, VISION: 0.1%
Age Factor	Multiplier applied to premium based on customer age range	Ages 18-25: 0.8x, 26-35: 1.0x, 36-45: 1.2x, 46-55: 1.5x, 56-65: 2.0x, 66-75: 3.0x, 76-85: 4.0x
Processing Fee	Fixed $25 administrative fee added to all policies	Added to all policies regardless of coverage amount

Renewal Terms

Term	Definition	Example
Standard Renewal	Normal renewal with 3% premium increase	Previous $1,000 premium becomes $1,030
Upgrade Renewal	Increase coverage by 25% with proportional premium increase	$200,000 coverage increases to $250,000; premium increases 25%
Downgrade Renewal	Decrease coverage by 25% with proportional premium decrease	$200,000 coverage decreases to $150,000; premium decreases 25%
Multi-Year Renewal	Longer-term commitment (24 or 36 months) with 5% discount	24-month term receives 5% discount on annual premium
Loyalty Discount	1% per year of customer loyalty (max 15%)	8-year customer receives 8% loyalty discount
No-Claims Discount	2% per claim-free year (max 20%)	5 years without claims = 10% discount
Multi-Policy Discount	10% discount for customers with 2+ active policies	Customer with auto and home policies receives 10% discount on both

Fraud Detection Terms

Term	Definition	Example
Fraud Threshold	Score of 70+ triggers fraud investigation and blocks payment	Claim with fraud score 75 receives "UNDER REVIEW" status, $0 payment
Claim Frequency	Number of claims in recent period; >3 in 30 days adds +25 fraud points	Customer with 4 claims in 30 days flagged as high-risk
Provider Fraud Score	Provider's historical fraud rating; score >50 adds +20 points to claim	Provider with score 60 makes all their claims more suspicious
Pattern Detection	Identifies duplicate or identical claims; +20 points if found	Same customer, claim type, and amount within 90 days triggers alert
Auto-Approve Limit	Claims ≤$5,000 with fraud score < 50 are automatically approved	$3,200 claim with score 30 is AUTO-APPROVED; $7,000 requires manual review

Processing Terms

Term	Definition	Example
Processing Mode	Determines which transaction types to process: POLICY, RENEWAL, CLAIM, or ALL	Batch job runs in "CLAIM" mode to process overnight submissions
Commit Frequency	Number of records (500) processed before database commit	After processing 500 policies, database commit occurs
Claim Status	Current state: PROCESSING, PENDING, UNDER REVIEW, APPROVED, PATIENT RESPONSIBILITY	Claim with fraud score 75 gets "UNDER REVIEW" status
Policy Status	ACTIVE (current coverage), RENEWED (replaced by new policy), EXPIRED, CANCELLED	Policy status changes to "RENEWED" when customer renews
Record Type	HD (Header - skip), DT (Detail - process), TR (Trailer - skip)	Only DT records are processed; HD and TR are informational

Key System Constants

Constant	Value	Purpose
MAX-COVERAGE	$999,999,999	Maximum allowed policy coverage
MIN-AGE	18	Minimum customer age for eligibility
MAX-AGE	85	Maximum customer age for eligibility
FRAUD-THRESHOLD	70	Score triggering fraud investigation
AUTO-APPROVE-LIMIT	$5,000	Maximum claim amount for auto-approval
COMMIT-FREQUENCY	500	Records per database commit
PROCESSING-FEE	$25	Fixed fee added to all policies