Glossary

Indemnity payments are (1) losses paid or expected to be paid directly to an insured by an insurer for first-party (e.g., property) coverages or on behalf of an insured for third-party (e.g., liability) coverages, or (2) payments made by the indemnitor under a hold harmless clause on behalf of the indemnitee.

An independently filed form is an insurance coverage form or policy that is filed for regulatory approval by an individual insurer, rather than by an insurance advisory organization. Typically, independently filed forms are drafted by the insurer filing them, and they differ in some respects from standard forms.

An independent adjuster is a claims adjuster who provides services on a contract basis to insurance companies, self-insured firms, and governmental entities. Depending on the nature of the claim being handled, billing can be on a time-and-expense basis, flat fee-per-claim basis, or flat annual fee for all claims. Independent adjusters are often used when an insurer is overloaded with claims (often due to a catastrophe), when a claim occurs in a remote locale, or when special expertise is required to adjust a claim.

The independent agency system consists of marketing insurance through independent contractors (agents) who sell insurance on a commission or fee basis with one or more insurers. In contrast to the direct marketing system, the independent agent retains ownership, use, and control of policy records and expiration data.

An independent contractor is an individual or company that has signed an agreement with another party to perform some job or function on behalf of that party without the direction or oversight of the party. As respects workers compensation, many states have established criteria that determine whether an individual is functioning as an independent contractor or employee. A worker classified as an independent contractor and not an employee is ineligible to receive benefits under the workers compensation policy of the other party. In spite of the rules established, the delineation of an independent contractor remains in many jurisdictions as a legal ambiguity.

Independent directors policies are directors and officers (D&O) coverage designed for individuals who serve on a number of different corporate boards and are not employees of any individual company. Such policies are becoming increasingly rare because few "professional" directors (or any directors, for that matter) sit on the boards of companies that do not already purchase D&O coverage.

An independent medical examination (IME) is a medical or psychiatric evaluation to determine the current status of an employee's medical condition or to determine whether the condition is related to employment.

An independent practice association is a type of health maintenance organization (HMO) in which individual practitioners see patients enrolled in the HMO but also treat their own patients who are not HMO participants. Compensation to the physician is based on either a per-patient fee or a discounted fee schedule.

Indeterminate premium life insurance refers to a nonparticipating whole or permanent life insurance policy where the premium can adjust up and down during the policy term. The premium under an indeterminate premium life insurance policy reflects the insurance company's mortality experience, investment returns, and expenses. If these three elements are more profitable than had been loaded for in the initial premiums, future premiums will be reduced; if they are less profitable, they will be increased but not beyond a guaranteed maximum. The premiums for this type of whole life policy are usually lower than most other whole life policies. The indeterminate premium payments include the cash value amount and the face value.

Index-based contracts, such as the Chicago Board of Trade's PCS Options and the Bermuda Commodities Exchange's GCCI Options, are options contracts based on an index. These options contracts are insurance derivatives. As derivatives, their value is derived from some underlying instrument. Indexes provide that underlying instrument. Indexes provide loss information relative to individual loss events and aggregate loss data. The more accurate the loss information is, the better the index is. Variation between a hedger's actual losses and those used by the index creates basis risk.