M&E charge

See mortality and expense charge.

mail kit

In the sale of direct response insurance products, a package that is mailed directly to a list of prospective purchasers who form an identified target market and that includes all the information and forms that a consumer needs to make a purchase decision and to apply for a policy. See also direct response products and target market.

maintenance expenses

For an insurance company, any product-related costs, including renewal commissions and some agency expenses, that are incurred after an insurance contract is in force and that are necessary to keep a policy in force. Also known as renewal expenses.

maintenance fee

A fee that insurers charge to the owners of variable annuities to pay for administration of the contract, including preparation of statements, premium notices, mailings, and other customer services. The fee is typically a flat fee that is deducted pro rata from the various accounts in proportion to the assets in the accounts.

major medical insurance plan

Traditional medical expense insurance plan that provides substantial benefits for insureds’ hospital expenses, surgical expenses, and physicians’ fees.

managed health care plan

A medical expense insurance plan that combines the financing and delivery of health care within a system that seeks to control the cost, accessibility, and quality of care. Insureds within such plans typically must use, or are provided incentives to use, the health care providers managed, owned, or under contract with the health insurance provider. See also preferred provider arrangement (PPA) and preferred provider organization (PPO).

management accounting

The process of identifying, measuring, analyzing, and communicating financial information.

management by exception (MBE)

A management principle stating that managers should be informed about an operational activity only when a result differs by a specified monetary amount or a specified percentage from what was expected.

manager of agency operations

The person who heads an insurer’s agency operations unit and who serves as the primary link between the home office and the insurer’s field offices. See also home office and field office.

mandated benefits

In the United States, benefits required by state law to be provided by health insurance policies, including coverage for newborn and handicapped children, alcoholism and substance abuse treatment, and the treatment of mental illness.

manual rating

A method of calculating group insurance premium rates for broad classes of groups, especially for groups with no credible claim experience. In manual rating, the insurer uses its own past experience—and sometimes the experience of other insurers—to estimate a group’s expected claims and expense experience. See also experience rating.

margin

See net income.

marginal cost

In accounting, the additional total expense incurred as a result of producing one additional unit of an existing product or service. Also known as incremental cost.

market

A group of people who are actual or potential buyers of a product. See also target market.

market conduct

The general term that insurers and regulators use to designate the area of insurer activity involving advertising, sales, and distribution of insurance products.

market conduct examination

In the United States, a type of routine on-site regulatory investigation in which state insurance regulators verify that, in its dealings with customers, the insurer is complying with all applicable statutes and regulations regarding sales, advertising, underwriting, and claims. Contrast with financial condition examination. See also on-site regulatory examination.

market conduct laws

State insurance laws that are designed to ensure that insurance companies conduct their businesses fairly and ethically.

marketing

The way a business organization identifies its customers, defines and develops the products or services that its customers want, and sells and distributes those products or services to customers.

marketing function

The functional area within a business organization that conducts and organizes the company’s sale and distribution of products and services.

market risk

For investors, the risk associated with fluctuations in stock prices.

market value

See current market value.

market value adjusted annuity

An annuity product that features fixed interest rate guarantees combined with an interest rate adjustment factor that can cause the surrender value to fluctuate in response to market conditions.

master application

In group insurance, a document that contains the specific provisions of the plan of insurance being applied for and that is signed by an authorized officer of the proposed policyholder.

master budget

In accounting, the overall operating and financing plans for a company during a specified accounting period. Also known as performance plan.

master group insurance contract

In group insurance, the legal document certifying the relationship between the insurer and the group policyholder and insuring a number of people under one contract. See also certificate of insurance.

matching principle

In accounting, an expense recognition concept which states that a company should recognize expenses as the company earns the revenues related to those expenses, regardless of when the company receives payment for the revenues earned.

material misrepresentation

(1) In general contract law, a misrepresentation of the facts by a contracting party that induces another party to enter into a contract when, had the truth been known, he would not have done so. (2) In insurance law, a misrepresentation of the facts by an insurance applicant that is relevant to the insurer’s evaluation of a proposed insured.

materiality

Relevancy. (1) In insurance law, all facts that affect an insurer’s risk-appraisal decision. (2) In accounting, the quality of accounting information that requires companies to disclose all significant information in their financial statements.

maturity date

(1) For endowment in insurance, the date on which an insurer will pay the face amount of an endowment policy to the policyowner if the insured is still living. (2) In investing, the date on which a bond issuer must repay to the bondholder the amount originally borrowed. (3) For an annuity, the date on which the insurer begins to make annuity payments. Also known as income date.

maturity value

See bond principal.

maximum benefit period

In insurance, the maximum length of time during which benefits will be paid under an insurance contract.

MBE

See management by exception.

McCarran-Ferguson Act

A U.S. federal law under which Congress agreed to leave insurance regulation to the states as long as Congress considered state regulation to be adequate.

MCCSR

See Minimum Continuing Capital and Surplus Requirements.

MDO policy

See monthly debit ordinary policy.

measuring-unit concept

An accounting principle which states that a company should record its accounting information in monetary terms, such as U.S. dollars or Canadian dollars.

mediation

A conflict resolution method in which an impartial third party facilitates negotiations between conflicting parties in an effort to create a mutually agreeable resolution to the dispute.

Medicaid

In the United States, a joint federal and state medical insurance program administered by the states to provide payment for health care services, including long-term care, for people with low incomes.

medical expense insurance

A type of health insurance coverage that pays benefits for all or part of the treatment of an insured’s sickness or injury. See also health insurance.

Medical Information Bureau

See MIB, Inc.

medical necessity

A health insurance policy criterion requiring that a prescribed medical procedure be one that (1) is considered effective and that is normally used for the specified illness or injury and (2) does not exceed in scope, duration, or intensity the level of care needed to provide safe, adequate, and appropriate diagnosis or treatment.

medical report

The portion of an insurance application designed to be completed by both the proposed insured and a physician. A physician records the proposed insured’s answers to health history questions and records the results of a medical examination given to the proposed insured. In life insurance, the medical report is known as Part II of the insurance application. See also paramedical report and Part II.

medical savings account (MSA)

In the United States, a trust that is created for the purpose of paying the trust account holder’s qualified medical expenses and that provides the account holder with certain tax advantages.

Medicare

A U.S. government health insurance plan that provides hospital, medical, and surgical benefits for persons age 65 and older and people with certain disabilities. Medicare Part A provides basic hospital insurance and Medicare Part B provides benefits for physicians’ professional services.

Medicare supplement insurance

In the United States, health insurance coverage designed to provide benefits for certain expenses not covered under Medicare, such as Medicare deductible amounts and copayments. This coverage is available only to individuals who are covered by Medicare. Also known as Medigap insurance. See also Medicare.

Medigap insurance

See Medicare supplement insurance.

membership rights

In a mutual insurance company, ownership rights, such as the right to vote in elections for the company’s board of directors on the basis of one vote for each policyowner. See also mutual insurance company.

memorandum of association

In Canada, a document similar to letters patent that contains the fundamental terms for registering for incorporation in the provinces of British Columbia, Alberta, Saskatchewan, Ontario, Newfoundland, or Nova Scotia.

Mental Health Parity Act of 1996

In the United States, federal legislation that requires group health plans that offer medical and mental health benefits to establish the same annual and lifetime dollar limits for both mental health benefits and medical health benefits.

merger

A legal transaction joining two corporations to form a distinct new corporation.

MGA

See modified guaranteed annuity.

MIB, Inc

A nonprofit organization established to provide information to insurers about impairments that applicants have admitted to, or that other insurers have detected, in connection with previous applications for insurance. Formerly known as Medical Information Bureau.

minimum capital and surplus requirements

Solvency requirements, established by each jurisdiction’s regulators, that set specific minimum dollar amounts of capital and surplus for an insurer as a whole and for each of the company’s product lines. Also known as statutory minimum capitalization requirements.

minimum cash balance

The amount of cash that a business organization determines is necessary to pay all obligations in a specified accounting period without having excess cash. Also, the monetary amount that a bank requires an account holder to keep in a given account at all times.

minimum cession

A statement in a reinsurance treaty describing the smallest amount of risk that an insurer will cede.

Minimum Continuing Capital and Surplus Requirements (MCCSR)

In Canada, risk-based capital requirements that federally licensed insurers must meet in order to be considered solvent. The MCCSR are similar to the National Association of Insurance Commissioners (NAIC) risk-based capital (RBC) ratio requirements in the United States.

minimum death benefit guarantee

Statement included in variable annuities specifying that, if the contract owner dies before the annuity payments begin, the named beneficiary will receive a benefit equal to the greater of (a) the total amount of premium payments made for the annuity, less any withdrawals made, or (b) some enhanced value established as of the time of the contract owner’s death.

minimum distribution

See required minimum distribution (RMDs).

minimum guaranteed interest rate

For a fixed annuity or a variable annuity’s fixed account, the interest rate—typically three or four percent—that an insurance company contractually agrees that it will pay on the principal balance.

minimum premium plan (MPP)

A group health insurance funding mechanism under which the group policyholder deposits into a special account funds that are sufficient to pay a stated amount of expected claims, and the insurer administers the plan and pays claims from that special account until the funds are exhausted. Thereafter, the insurer is responsible for paying claims from its own funds, and it charges the policyholder a premium for the coverage provided. See also administrative services only (ASO) contract and self-insured group insurance plan.

minimum required distributions (MRDs)

See required minimum distributions (RMDs).

Minimum Reserve Standards for Individual and Group Health Insurance Contracts

A National Association of Insurance Commissioners (NAIC) model law that establishes minimum reserve standards for all types of individual and group health insurance products except Medicare supplement and long-term care policies.

minor

A person who has not attained the legal age of majority and, thus, has limited contractual capacity.

misrepresentation

A false or misleading statement. (1) In insurance sales, a false or misleading statement made by a sales agent to induce a customer to purchase insurance is a prohibited sales practice. (2) In insurance underwriting, a false or misleading statement by an insurance applicant may provide a basis for the insurer to avoid the policy.

misstatement of age or sex provision

A life insurance, health insurance, and annuity policy provision that describes how policy benefits will be adjusted if the age or sex of the insured has been misstated in the insurance application. Typically, the benefits payable will be those that the premiums paid would have purchased for the correct age or sex.

MLA system

See multiple-line agency system.

modco

See modified coinsurance.

model act

See model bill.

Model Annuity and Deposit Fund Disclosure Regulation

See Annuity Disclosure Model Regulation.

model bill

A sample law that is developed by a national association of state or provincial regulators and that the states or provinces are encouraged to use as a basis for their laws. In the United States, the National Association of Insurance Commissioners (NAIC) proposes model insurance laws, and in Canada, the Canadian Council of Insurance Regulators (CCIR) proposes such laws.

Model Hazardous Condition Regulation

In the United States, a National Association of Insurance Commissioners (NAIC) model regulation that gives the insurance commissioner of an insurer’s state of domicile the authority to order the insurer to take specified actions to improve its financial condition.

Model Law on Examinations

In the United States, a National Association of Insurance Commissioners (NAIC) model law that requires each insurer domiciled in the state to undergo a financial condition examination at least every five years.

Model Newborn Children Bill

In the United States, a National Association of Insurance Commissioners (NAIC) model law that requires health insurance policies that provide coverage for a family member of the insured to provide coverage for a newly born child of the insured from the moment of birth.

Model Policy Loan Interest Rate Bill

In the United States, a National Association of Insurance Commissioners (NAIC) model law that places a maximum limit on the interest rate that may be charged on policy loans and requires insurers to state the applicable interest rate in their policies.

Model Privacy Act

See Insurance Information and Privacy Protection Model Act.

model regulation

See model bill.

Model Regulation for Complaint Records to be Maintained Pursuant to the NAIC Unfair Trade Practices Act

In the United States, a National Association of Insurance Commissioners (NAIC) model regulation that describes the minimum information that insurers must include in their complaint records and sets forth a sample format for a complaint record.

Model Regulation to Eliminate Unfair Sex Discrimination

In the United States, an National Association of Insurance Commissioners (NAIC) model regulation that prohibits life and health insurers from denying benefits or coverage on the basis of a proposed insured’s sex and/or marital status.

Model Replacement Regulation

See Life Insurance and Annuities Replacement Model Regulation.

modified coinsurance (modco)

A type of proportional reinsurance in which the ceding company maintains the entire reserve for each policy. See also ceding company and reinsurer.

modified coverage policy

A whole life insurance policy under which the amount of insurance provided decreases by specific percentages or amounts either when the insured reaches certain stated ages or at the end of stated time periods.

modified guaranteed annuity (MGA)

A deferred annuity for which the underlying assets are held in a separate account, but the contract values are guaranteed if held for a specific time.

modified opinion

In accounting, an auditor’s opinion that contains explanatory language concerning specified circumstances, such as material inconsistencies resulting from a change in accounting principles or practices.

modified premium policies

An insurance policy for which the policyowner first pays a lower premium than she would for a similar level-premium policy for a specified initial period and then pays a higher premium than she would for a similar level-premium policy. Contrast with level premium policies and single premium policies.

modified reserve

A type of contractual reserve an insurer develops using a modified reserve valuation method that permits an insurer to set a lower-than-level first-year contractual reserve in recognition of the surplus strain from a product’s first-year expenses.

money market fund

An investment fund that achieves great liquidity by investing in short-term, securities offering low returns and little investment risk.

money market subaccount

One of the three main asset classes in an insurance company’s separate account within which owners of variable annuity contracts can deposit funds and have the funds invested in short-term money instruments or cash equivalents, such as bank certificates of deposit (CDs) and United States Treasury bills. See also bond subaccount and stock subaccount.

money purchase plan

See defined contribution pension plan.

monthly debit ordinary (MDO) life insurance

A whole life insurance policy that is marketed through the home service distribution system and is paid for by monthly premium payments. See also home service distribution system.

moral hazard

The possibility that a person may act dishonestly in an insurance transaction.

morbidity

The relative incidence of sickness and injury occurring among a given group of people. Contrast with mortality.

morbidity rate

The rate at which sickness and injury occur within a defined group of people. Insurers base health insurance premiums in part on the morbidity rate for a proposed insured’s age group. Contrast with mortality rate.

morbidity table

A chart that shows the rates of sickness and injury occurring among given groups of people categorized by age. Contrast with mortality table.

mortality

The relative incidence of death occurring among a given group of people. Contrast with morbidity.

mortality and expense risks (M&E) charge

A variable annuity fee designed to cover various risks and expenses assumed by the insurer, including the risk involved in providing the annuity death benefit and certain other guarantees. Generally, the M&E charge is calculated as a percentage of the assets held by the investment funds underlying the various subaccounts.

mortality experience

The number or rate of deaths that actually occur in a given group of people. Contrast with expected mortality.

mortality margin

A favorable difference between an insurer’s actual mortality experience and the expected mortality used in the technical design of an insurance product. A type of profit margin.

mortality rate

A percentage rate at which death occurs among a defined group of people of a specified age and sometimes of a specified gender. Insurers base the premiums for life insurance in part on the mortality rate for a proposed insured’s age group. Contrast with morbidity rate.

mortality risk

(1) The likelihood that a life insured will die sooner than statistically expected. (2) The likelihood that an annuitant will live longer than statistically expected.

mortality table

A chart that shows the expected death rates among a particular group at each age—that is, how many of the people in each age group may be expected to die in a given year. Contrast with morbidity table.

mortality table with projection

A chart used in life insurance product design and premium pricing showing mortality rates that an insurer has modified by multiplying them by a chosen percentage. Contrast with static mortality table.

mortgage

A loan secured by a pledge of specified real property.

mortgage redemption insurance

A plan of decreasing term life insurance designed to provide a death benefit amount that corresponds to the decreasing amount owed on a mortgage loan.

motor vehicle record (MVR)

In the United States, a record that typically contains information about a person’s driving history, including information about traffic violations and arrests and convictions for driving-related incidents.

Movement of Securities Return

A statement that each federally-licensed insurer in Canada must file every six months with the Office of the Superintendent of Financial Institutions (OSFI). The statement lists all of the securities that the insurer bought and sold during the preceding six-month period and all of the insurer’s loans, including its policy loans, for that period.

moving average market method

An accounting process in which an insurer in Canada systematically adjusts unrealized gains or losses that result from changes in the current market value of equity investments over a period of years.

MPP

See minimum premium plan.

MRDs

See minimum required distributions.

MSA

See medical savings account.

multiple employer group

A type of group that generally is eligible for group insurance coverage and that consists of employees of (1) two or more employers, (2) two or more labor unions, or (3) one or more employers and one or more labor unions.

multiple-line agency (MLA) system

An agency-building insurance distribution system that uses full-time career agents and agent-brokers to distribute life, health, and property/casualty insurance products for a group of affiliated insurance companies. The MLA system offers a more comprehensive product line than the ordinary system. See also agency-building distribution system.

mutual benefit method

A method used in the past to fund life insurance in which the participating members of a mutual benefit society agreed to pay an equal, specific amount of money after the death of any other member. Also known as post-death assessment method.

mutual fund

An account established by a financial services company that combines the money of many people and invests it in a variety of financial instruments.

mutual insurance company

An insurance company that is owned by its policyowners. Contrast with stock insurance company.

mutualization

The process of converting a stock insurance company’s corporate form of organization to that of a mutual company. See also mutual insurance company, demutualization, and stock insurance company.

MVR

See motor vehicle record.

LOMA's Glossary of Insurance and Financial Services Terms Copyright © 2002 LOMA (Life Office Management Association, Inc.). Used with permission from the publisher. All right reserved. Copying or downloading this information without permission from the publisher is a violation of federal and international law. For information on purchasing a copy of the Glossary or for additional information on LOMA and its educational programs, visit LOMA's Web site at www.loma.org. LOMA is a registered service mark of the Life Office Management Association, Inc.