Glossary

Disparagement of goods is an untrue or misleading statement about a competitor's goods made with the purpose of inducing consumers not to buy the product. Under some nonstandard general liability coverage forms, disparagement of goods is a specifically defined personal injury offense.

Disparate impact discrimination claims involve apparently neutral policies that have the effect of discriminating against a certain class of persons, even though such discrimination may not be intentional. For example, if a city required all police officers to be at least 5'10" tall, a female applicant would be likely to allege disparate impact discrimination because the vast majority of women are considerably shorter. Claims alleging disparate impact discrimination are covered under employment practices liability insurance policies.

Disparate treatment discrimination claims involve illegal, deliberate discrimination against an individual, such as failing to promote an otherwise qualified employee based upon race, age, sex, or national origin. Claims alleging disparate treatment discrimination are covered under employment practices liability insurance policies.

Dispersion is a statistical term denoting the variability of a distribution around the mean or other central tendencies. Actuaries and risk managers often develop and analyze this to determine the variability of risk. The less dispersion of the distribution, the greater the likelihood that actual results or losses will fall within a specified range of that central tendency and the result is a lower variability of risk. Wide dispersion of results means less certainty in predicting a particular outcome. Statistics that are measures of this variability include the range, variance, and standard deviation.

A distribution system in an insurance context refers to the method by which an insurer reaches its insureds—that is, as direct writer, wholesaler, agency system, or broker market.

Diversification is a risk control technique that spreads loss exposures over a myriad of projects, products, areas, or markets. This technique is important since financial returns from various enterprises are not always directly correlated, so that when one activity has low returns, other activities likely would have higher returns. For example, many crop farms in the Midwest produce both soybeans and corn. By producing both crops rather than just one, the farm is less at risk of experiencing extreme fluctuations in revenues since the market prices of the two crops do not always move in the same manner. In one year, for example, low soybean yields and revenues may be counterbalanced by relatively high corn yields. An example of financial diversification is investing in a combination of stocks, bonds, and treasury bills to reduce overall financial risk.

Diversification credit is an enterprise risk management term referring to the recognition of the "portfolio effect"—that is, the fact that the economic capital required at the enterprise level will be less than the sum of the capital requirements of the business segments calculated on a stand-alone basis. The diversification credit is typically apportioned to the business segments in a manner that attempts to preserve the relative equity of the capital attribution process.

A divided risk endorsement can be attached to any type of insurance policy for the purpose of delineating exposures covered by particular insurance policies (e.g., project or site-specific policies) to remove any possibility of double coverage. For example, these endorsements are commonly used on contractors' workers compensation policies to exclude payrolls associated with the contractor's work on a project that is insured under a wrap-up insurance program.

Dividends are a partial return of premium to the insured based on the insurer's financial performance or on the insured's own loss experience. Insurers cannot legally guarantee the payment of dividends. In the captive arena, there are two types: policyholder dividends are paid back through the insurance premium process to the insureds. They are before-tax expenses for the captive. Shareholder dividends are paid to the captive's shareholders after tax (and are then taxed again to the shareholder).

Dividend accumulation refers to dividends paid by life insurers that may be added to the cash value. These accumulated dividends will also earn income for the insured.