Document signed by patients stating liability in paying for medical services received. This protects the physician’s right to collect payment for professional services provided to patients.
Insurance Encyclopedia
Financial promotion
Regime introduced under FSMA, s.21. A financial promotion is the communication, in the course of business, of an invitation or inducement to engage in an investment activity. It is unlawful if it is not made by an authorised person or has not been approved by such a person. ‘Communication’ embraces all forms of communication in place of previous separate rules for insurance advertisement, unsolicited calls, etc.
Financial quota share
A form of reinsurance that enables a cedant to increase its statutory surplus by the amount of the ceding commission in the reinsured unearned premium reserve. Surplus relief arises because statutory accounting requires insurers and reinsurers to charge immediately all acquisition costs to the accounting period in which the business is written, even when the premium is unearned at the end of the period. Referred to as pre-paid acquisition costs in the unearned premium reserve, or the equity in the unearned premium reserve.
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UK: Cedant and reinsurer share the risk in agreed proportions. The cover applies to future and current years. Reinsurance commission is on a sliding scale starting with 30 per cent commission for a loss ratio of 70 per cent. For every loss ratio change of 1 per cent, the commission changes by 1 per cent. A commission that increases with the loss ratio helps the cedant when it is most needed. If the cedant has an expense ratio of 30 per cent then the cedant will have an underwriting result of zero regardless of the actual loss ratio for the year. This improves the solvency margin.
Financial record
See: Account, Financial Accounting Record , ledger card , and ledger .
Financial reinsurance
REINSURANCE: A form of reinsurance that considers the time value of money and has loss containment provisions transacted primarily to achieve financial goals, such as capital management, tax planning, or the financing of acquisitions. Also see Finite Reinsurance.
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A form of reinsurance that considers the time value of money and has loss containment provisions. One of its objectives is the enhancement of the cedant’s financial statements or operating ratios, e.g., the combined ratio loss portfolio transfers and financial quota shares.
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UK: There is no clearly accepted definition but financial reinsurance is more concerned with the time value of money and financial goals than risk transfer. The intention is to stabilise the cedant’s balance sheet and provide capital support. The cedant pays a premium to cover defined losses on a multi-year basis up to an agreed maximum. A profit share element converts a conventional treaty into financial reinsurance. The cedant benefits from credit enhancement by improving key ratios such as the combined ratio. Specific financial reinsurance products include: time and distance policies; loss portfolio transfers; spread loss treaty; adverse development cover; blended cover.
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REINSURANCE: This is a form of reinsurance involving less underwriting risk transfer and more investment or timing risk transfer from the cedant. These contacts are often on a multi-line, multi-year basis. They typically absorb at least the cost associated with claims differing from expected claims experience, and often carry excess of loss terms and multiple options Premiums usually reflect the time value of money to a large extent than traditional excess of loss contracts.
Financial responsibility
Liability for payment of a patient’s medical bill to the provider of service.
Financial responsibility clause
In automobile insurance, a provision in the policy stating that the insured has the minimum amount of liability insurance coverage required by the state’s financial responsibility law. Each state has some form of financial responsibility law.
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The clause in an auto policy stating that, when the policy is certified as future proof of financial responsibility, the policy will comply with the financial responsibility laws to the extent required.
Financial responsibility clause (Vehicle Insurance)
A clause stipulating that the policy adheres to the laws of the state the vehicle is being operated in.
Financial responsibility law
US: A statutory provision requiring owners of automobiles to provide evidence of their ability to pay damages arising out of the ownership, maintenance, or use of an automobile.
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Financial responsibility law (particularly applicable to Automobile Insurance in various States in USA) is a law which requires an individual to prove that he or she is able to pay for damages resulting from an accident. A financial responsibility law does not specifically require the individual to have insurance coverage; instead, the law requires the individual to be able to demonstrate the financial capacity to pay, even if the individual is not at fault. This type of law is commonly associated with automobiles. Financial responsibility laws exist because not all states have a compulsory insurance law. However, many states consider an individual with an insurance policy to be compliant with a financial responsibility law, since most insurance policies have a minimum coverage that meets the state standard.
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When applied to automobile operations, this term signifies the minimum statutory limits of an operator’s responsibility for bodily injury and property damage caused by negligent operation of the vehicle.
FINANCIAL RESPONSIBILITY LAW
A state law that requires all automobile drivers to show proof that they can pay damages up to a minimum amount if involved in an automobile accident or convicted of a moving violation. The proof of ability to pay can be in the form of liability insurance or a cash bond. Fault is not an issue as all parties to an accident must show financial responsibility. (See SR-22).