Glossary

Flat in an insurance context refers to a premium quoted without interest, service, additional charges, or adjustments. For example, when a premium is quoted on a "flat" basis, no additional premiums (or refunds) will be due under the policy, regardless of loss experience or changes in exposure during the term of coverage.

Flat cancellation in an insurance context is the cancellation of an insurance policy or bond as of its effective date, and before the insurer has assumed liability. This requires the return of paid premium in full since the insured has never been covered under the policy.

A flat commission is one with a fixed rate.

A flat dividend is a policyholder dividend paid to the insured as a flat percentage of the premium, which is usually between 5 and 15 percent. Dividends are not guaranteed and can be paid only after the insurer's board of directors declares a dividend.

A flat rate is a fixed rate not subject to adjustment, regardless of loss experience or changes in exposure during the term of coverage. In reinsurance, this is a percentage rate applied to a ceding company's premium writings for the classes of business reinsured to determine the reinsurance premiums to be paid to the reinsurer.

A fleet is five or more automobiles as used for classifying commercial vehicles under the business auto policy (BAP). Less than five is considered nonfleet. The distinction is made for statistical coding purposes. It does not have an effect on the rating factors.

Fleet automatic, in automobile insurance, provides physical damage coverage automatically to all newly acquired automobiles owned by the insured. Premium charges for these automobiles are made through either a reporting form or an audit at the end of the policy period. The term was used before the advent of the business auto coverage form when a physical damage endorsement was added to the commercial auto liability policy to afford such coverage. Two versions of the endorsement were available: fleet automatic and nonfleet automatic. The business auto policy (BAP) equivalent to physical damage fleet automatic is covered auto symbol 2, 3, or 4.

A fleet of companies in an insurance context refers to a number of insurance companies under the same management.

A fleet policy is an insurance contract applying to a number of vehicles, usually with the requirement that they be under common ownership.

The fleet policy for aircraft typically affords both liability and hull coverages. Compared to a stand-alone nonowned aircraft liability policy, a fleet policy offers a number of benefits for an aircraft owner: coverage is generally broader and more cost-effective, losses under the fleet policy will affect the aircraft management firm's (AMF's) loss history rather than the owner's loss history, the AMF handles claims, and, because coverage is handled by a single party (the AMF) rather than being divided between the owner and manager, coverage gaps are less likely. Disadvantages include dilution of limits, possible policy cancellation by the AMF, and the aircraft owner likely being barred from suing the AMF for faulty maintenance.