S&L

See savings and loan association.

SAD

See Special Activities Database.

salaried sales distribution system

An agency-building insurance distribution system that relies on the use of an insurer’s salaried sales representatives to sell and service all types of insurance and annuity products. See also agency-building distribution system and salaried sales representative.

salaried sales representatives

In the insurance industry, an insurance company salesperson who is a company employee and is paid a salary rather than commissions.

salary continuation plan

A short-term disability income insurance plan that provides 100 percent of an insured’s salary, beginning on the first day of the insured’s absence from work due to sickness or injury and continuing for some specified time.

sale-and-leaseback transaction

A method of financing using real estate, in which the owner of a building sells the real estate to an investor but immediately leases back the real estate from the investor.

sales agent

See insurance agent.

sales illustration

Promotional material used during or after a sales presentation to help explain complex products. Insurers often use graphic representations that show how an insurance policy’s premiums, values, and benefits develop and change over a period of years. Also known as policy illustration.

sales presentation

The promotional message a sales person delivers to a prospect to explain, stimulate interest in, and motivate the prospect to purchase the product or products recommended in the proposal.

sales promotion

A company-sponsored program that is designed to motivate new sales activity and to offer one or several incentives for sales production.

sales revenue

The total dollar volume of sales.

sales volume

The number of units of product sold.

salvage value

The residual value or selling price of an asset at the end of its useful life.

SAP

See statutory accounting practices.

savings and loan association (S&L)

A depository institution that gets the majority of its deposits from consumers and makes the majority of its loans as home mortgage loans. Also known as savings bank and thrift.

savings bank life insurance (SBLI)

In the United States, life insurance coverage sold by authorized savings banks to people who live or work in the state in which the insurance is sold.

Savings Incentive Match Plan for Employees (SIMPLE)

In the United States, a qualified retirement plan that may be established by small employers with 100 or fewer employees. (1) According to the terms of a SIMPLE individual retirement account (IRA), both the employer and employee can make tax-deductible contributions, up to a specified maximum, to an IRA that the employer has established for the employee. All earnings accumulate on a tax-deferred basis. (2) According to the terms of a SIMPLE 401(k) plan, both the employer and the employee can make contributions to the 401(k) plan up to a specified maximum. Employer contributions to the plan are deductible from the employer’s current taxable income, employee contributions are on a pre-tax basis, and all earned income accumulates on a tax-deferred basis.

SBLI

See savings bank life insurance.

scenario analysis

A quantitative modeling technique that involves entering different sets of data into a model and then determining how changes in the input data affect the model’s output.

scheduled net debt

For purposes of determining the benefit payable under a consumer credit insurance policy, the lump-sum amount needed to pay off the debt on a given date according to the credit agreement’s repayment schedule.

schedule of benefits

(1) Under a group insurance plan, a table that specifies the amount of coverage provided for each class of insureds. (2) For medical expense claim purposes, a listing of medical treatments and the maximum benefit amounts an insurer will pay for each treatment.

schedules

In reinsurance arrangements, the provisions of the reinsurance treaty that cover the more variable elements such as the plans covered, retention limits, binding limits, and premium rates and allowances. Also known as exhibits and conditions.

seasoning requirement

In the United States, a licensing requirement that many states impose on foreign and alien insurers, which are eligible to receive a certificate of authority only if they have been actively engaged in the business of insurance for a specified time—usually three years. See also alien corporation, certificate of authority, and foreign corporation.

SEC

See Securities and Exchange Commission.

secondary beneficiary

See contingent beneficiary.

second excess

In a layering reinsurance arrangement involving two or more reinsurers, a specified amount of the remaining coverage above the first excess and up to a second, higher limit, that is ceded by the insurer to a second assuming company (or to a second group of assuming companies). See also first excess and layering.

second insured rider

A life insurance policy rider that provides term insurance coverage on the life of an individual other than the policy’s insured. Also known as optional insured rider and additional insured rider.

Section 1035 exchange

In the United States, a tax-free replacement of an insurance policy for another insurance contract covering the same person that is performed in accordance with the conditions of Section 1035 of the Internal Revenue Code.

Section 7702

In the United States, a section of the Internal Revenue Code that defines the conditions a life insurance policy must satisfy to qualify as a life insurance contract.

secured bond

A bond in which the issuer pledges something of value to guarantee the safety of the bondholder’s investment.

Securities Act of 1933

A U.S. federal law enacted to ensure that investors receive full and accurate disclosure of all information needed to make intelligent decisions when purchasing securities. Also known as Truth in Securities Act.

Securities and Exchange Commission (SEC)

In the United States, the federal agency that has oversight authority over the securities industry, including the governance of the sale of securities.

securities broker

An individual, corporation, or other legal entity that is engaged in the business of buying and selling securities for the accounts of others.

securities exchange

A market in which buyers and sellers of securities (or their agents or brokers) meet in one location to conduct trades.

securities law

The body of law that governs the purchase and sale of securities.

security

A certificate that represents either ownership interest in a business (for example, a share of stock) or an obligation of indebtedness owed by an institution (for example, a bond). Also known as financial instrument.

segregated account

In Canada, an investment account that insurers maintain separately from a general account to help manage the funds placed in variable insurance products such as variable annuities. See also separate account.

segregated funds

See segregated account.

selection against the insurer

See antiselection.

selection of risks

See risk assessment.

select mortality table

A mortality table that shows the expected mortality rates of people who have recently been underwritten for insurance policies. Contrast with basic mortality table and ultimate mortality table.

self-administered group plan

A group insurance plan for which the group policyholder is responsible for handling the administrative and record-keeping aspects of the plan. Contrast with insurer-administered group plan.

self administration

A method of reinsurance administration in which the ceding company maintains detailed records for each ceded policy and provides the reinsurer with periodic reports outlining the risk ceded and premiums due.

self-insured group plan

A group insurance plan in which the group sponsor, not an insurance company, is financially responsible for paying the claims of the group insureds. A group may be partially or fully self-insured. Also known as self-funded group insurance plan. Contrast with fully-insured group plan.

SEP plan

See simplified employee pension plan.

separate account

In the United States, an investment account maintained separately from an insurer’s general account to help manage the funds placed in variable insurance products such as variable annuities. Contrast with general account. See also segregated account.

separate account contract

A retirement plan funding vehicle under which plan assets are invested in an insurance company’s separate accounts. A separate account contract usually does not guarantee investment performance. Also known as investment facility contract.

service fee

(1) Compensation paid to an insurance sales agent equal to a small percentage of the premiums payable after the renewal commissions have ceased. Also known as persistency fee. (2) In unbundled insurance products, a fee insurers charge customers that is generally deducted from the amount of the transaction being handled.

service requirement

In a group insurance plan, a required length of time—usually three to six months—that a person must be employed before being eligible for coverage under the group insurance plan.

setback method

A procedure for modifying mortality tables so as to account for the projected improvement in future mortality. The procedure involves using, for a specified age, a tabular mortality rate for a younger age or an older age. Contrast with projection method.

settlement options

Choices given to the owner or beneficiary of a life insurance policy regarding the method by which the insurer will pay the policy’s proceeds when the policyowner does not receive the benefits in one single payment. Typically, the owner can elect (1) to leave the proceeds with the insurer and earn a specified interest rate, (2) to have the proceeds paid in a series of installments for a pre-selected period, (3) to have the proceeds paid in a pre-selected sum in a series of installments for as long as the proceeds last, or (4) to have the insurer tie payment of theproceeds to the life expectancy of a named individual through a life annuity. Also known as optional modes of settlement. See also life annuity.

settlement options provision

A life insurance and deferred annuity contract provision that grants the contract owner or beneficiary several choices as to how the insurer will distribute a contract’s proceeds. Also known in annuity contracts as payout options provision. See also payout options provision.

sex-distinct mortality table

A mortality table showing different mortality rates for males and females at each age. Also known as gender-based mortality table. Contrast with unisex mortality table.

shareholder

See stockholder.

Sherman Anti-Trust Act

United States federal legislation that prohibits business dealings tending to create a monopoly.

Shopper’s Guide to Long-Term Care Insurance

In the United States, a National Association of Insurance Commissioners (NAIC) publication designed to provide consumers with information about the long-term care insurance coverages that are available and to help consumers make informed purchase decisions.

short-term assets

Assets that a company expects to readily convert into cash or consume within the current accounting period, typically one year. Contrast with long-term assets.

short-term budget

A budget that generally covers a period of one year or less and relates mainly to a company’s operations during that period. Contrast with long-term budget.

short-term disability income insurance

A type of disability income coverage that provides disability income benefits for a maximum benefit period of from one to five years. Contrast with long-term disability income insurance.

short-term liabilities

In accounting, financial obligations that must be paid in one year or less. Contrast with long-term liabilities.

significant break in coverage

In the United States, and for purposes of the Health Insurance Portability and Accountability Act (HIPAA), a break of 63 days or more in an individual’s creditable coverage.

SIMPLE

See Savings Incentive Match Plan for Employees.

simple interest

The type of interest that is earned on the original principal only. Contrast with compound interest.

simplified employee pension (SEP) plan

In the United States, a qualified employer-sponsored pension plan whereby an employer establishes and makes contributions into an individual retirement account or individual retirement annuity for each participating employee; however, the employee owns the account. Self-employed people also may establish a SEP plan.

single premium policies

A type of life insurance or annuity contract that is purchased by the payment of one lump sum. (1) A single-premium deferred annuity (SPDA) is an annuity contract purchased with a single premium payment whose periodic income payments generally do not begin until several years in the future. (2) A single premium immediate annuity (SPIA) contract is an annuity contract that is purchased with a single premium payment and that will begin making periodic income payments one annuity period after the contract’s issue date. Contrast with level premium policies and modified premium policies.

six and six test

A requirement included in long-term care (LTC) insurance policies that states that an insured’s long-term care is not covered if (1) the insured was treated for a condition within six months prior to the effective date of coverage and (2) the condition becomes the cause of long-term care within six months after the effective date of coverage.

small employer

For purposes of the Health Insurance Portability and Accountability Act (HIPAA) in the United States, an employer that has 50 or fewer employees.

small insurance company tax status

For purposes related to federal tax filings, a U.S. life insurance company with less than $15 million in taxable income and less than $500 million in assets.

social insurance supplement coverage

Insurance that provides benefits for medical expenses not covered by government programs.

Social Security

In the United States, a federal program that provides specified benefits, including a monthly retirement income benefit to people who have contributed to the plan during their income-earning years. The program also provides a benefit to qualified disabled individuals, as well as to the widows, widowers, and surviving dependent children of qualified deceased workers.

Social Security Disability Income (SSDI)

A U.S. government program that provides monthly income benefits to qualified disabled individuals who are under age 65 and who have paid a specified amount of Social Security tax for a prescribed number of periods.

Society of Actuaries

An international organization that administers a series of actuarial examinations.

sole proprietorship insurance

A type of business insurance coverage that provides coverage on the life of the sole proprietor of a business—and can be used to pay the salary of hiring someone to run the business if the sole proprietor dies—or provides funds for a trusted employee or other person to buy a business at the death of the owner.

solvency

(1) A company’s ability to meet its financial obligations on time. (2) For an insurer, the ability to maintain capital and surplus above the minimum standard of capital and surplus required by law. Also known as statutory solvency. In Canada, known as capital adequacy.

solvency-basis accounting records

See statutory accounting records.

solvency laws

Insurance laws that are designed to ensure that insurance companies are financially able to meet their debts and pay policy benefits when they come due.

solvency-profitability tradeoff

A relationship between solvency and profitability that can be summarized in the following manner: as the level of profitability increases, the risk of insolvency generally increases; as the level of profitability decreases, the risk of insolvency generally decreases.

source documents

The various business papers and electronic forms that contain original information about a company’s financial transactions.

source of funds

See cash flow.

SPDA

See single premium policies.

Special Activities Database (SAD)

In the United States, a database maintained by the National Association of Insurance Commissioners (NAIC) that enables state insurance regulators to exchange information about insurance companies and individuals who have been the subject of an insurance department investigation, have been charged with violations, or are suspected of engaging in unlawful activities.

special class rates

See substandard premium rates.

specialized medical questionnaire

An underwriting document that requests an attending physician to provide a proposed insured’s detailed information on a specific illness or condition.

special risk

See substandard risk class.

special surplus

A part of a U.S. insurer’s surplus that the insurer’s board of directors has set aside to meet unforeseen contingencies or pay for certain extraordinary expenses. Also known as appropriated surplus and contingency reserve.

specified disease coverage

A type of health insurance coverage that provides benefits for the diagnosis and treatment of a specifically named disease or diseases, such as cancer. Also known as dread disease coverage. Contrast with critical illness (CI) insurance.

speculation

In insurance, the activity of purchasing insurance with the expectation of making a profit on the proceeds.

SPIA

See single premium policies.

split-dollar life insurance plan

An agreement under which a business provides individual life insurance policies for certain employees, who share in paying the cost of the policies.

split elimination period

For a health insurance policy, an increased waiting period for any claims related to an existing impairment, while the usual waiting period is applied to other claims.

split-funded plan

See combination pension plan.

spouse and children’s insurance rider

See family benefit coverage.

spread

See interest margin.

spread-loss reinsurance

A type of nonproportional reinsurance in which benefits usually begin after the ceding company has paid 100 percent of the expected total annual claim amount as calculated by the ceding company’s actuaries. See also reinsurance.

SSDI

See Social Security Disability Income.

staff model HMOstaff model HMO

A type of closed panel health maintenance organization (HMO) in which the physicians who provide medical services for HMO members are employees of the HMO and generally operate out of offices in the HMO’s facilities. See also health maintenance organization (HMO) and closed panel HMO.

standard premium rates

For insurance purposes, the premium rates charged insureds who are classified as standard risks.

standard risk class

In insurance underwriting, the group of proposed insureds who represent average risk within the context of the insurer’s underwriting practices and therefore pay average premiums in relation to others of similar insurability. Contrast with declined risk class, preferred risk class, and substandard risk class.

Standard Valuation Law

In the United States, a National Association of Insurance Commissioners (NAIC) model law that establishes minimum requirements for calculating or valuing reserves for life insurance and annuity policies.

standby assistance

In long-term care (LTC) insurance, assistance that is in the form of observing or being close by an insured performing activities of daily living. See also substantial assistance.

state bank

In the United States, a bank that operates under a charter granted by a state regulatory agency and is subject to regulation and supervision by state regulators.

state insurance code

The portion of a state’s legal code that is devoted to regulating the insurance industry.

state insurance department

In the United States, a state administrative agency that is charged with assuring that insurance companies operating within a state comply with all of that state’s insurance laws and regulations.

statement of cash flows

A financial statement that provides information about the company’s cash receipts, cash disbursements, and net change in cash during a specified period.

statement of operations

See income statement.

Statement of Policy Information for Applicant

A document that defines terms appearing in a universal life insurance policy contract and explains that many of the illustrated policy values are not guaranteed and, in some cases, are dependent upon the performance of equity-based investments. In the United States, the National Association of Insurance Commissioners (NAIC) Universal Life Insurance Model Regulation requires agents to provide this statement to consumers who apply for a universal life insurance policy.

statement of surplus

A financial statement that provides information about the change in an insurance company’s surplus account during a specified period.

state of domicile

The state in which a company incorporates and has its principal legal residence. Also known as domiciliary state.

static budget

A budget that contains amounts that are generally not subject to change unless management has approved the changes.

static mortality table

A type of mortality table in which the rates have not been adjusted.

statistical phase of IRIS

The first phase of the Insurance Regulatory Information System (IRIS) used in the United States to monitor the financial condition of insurers. IRIS was established and is operated by the National Association of Insurance Commissioners (NAIC). In this phase, which is conducted annually, a system of financial ratio analysis is applied to the Annual Statement data of all insurers. During this analysis, an IRIS standard for each of twelve required financial ratios is compared with a company’s actual financial ratios. Any unusual results require an analytical analysis of the company. See also analytical phase of IRIS and Insurance Regulatory Information System (IRIS).

statutory accounting practices (SAP)

The accounting standards and methods that all insurers in the United States must follow when preparing the Annual Statement and specified other financial reports that are submitted to regulators. Also known as statutory accounting principles.

statutory accounting principles

See statutory accounting practices (SAP).

statutory accounting records

In the United States, accounting records designed for financial reporting to state insurance regulators, whose primary interest is in evaluating insurance companies’ solvency and long-term financial stability. Contrast with GAAP accounting records.

statutory law

The type of law created by a legislative branch of government.

statutory minimum capitalization requirements

See minimum capital and surplus requirements.

statutory reserve

See policy reserve.

sticker

See prospectus supplement.

stock

A type of equity financial security that represents a share of ownership in a company. See also common stock and preferred stock.

stock bonus plan

A type of employee benefit savings plan that is funded primarily by employer contributions and that provides benefits in the form of shares of company stock.

stockbroker

See broker-dealer.

stock dividend

See dividend.

stock exchange

An organized marketplace where specific types of securities, such as common stock and bonds, are bought and sold by members of the exchange.

stockholder

A person or organization who owns stock in a
company and, thus, partially owns that company. Also known
as shareholder.

stockholder dividends

See dividends.

stock insurance company

An insurance company that is owned by the people who purchase shares of the company’s stock. Contrast with mutual insurance company.

stock redemption insurance

See stock repurchase insurance.

stock repurchase insurance

A type of business insurance coverage that provides the remaining stockholders of a company with money to buy the stock of a deceased partner. Also known as stock redemption insurance.

stock subaccount

One of the three main asset classes in an insurance company’s separate account within which owners of variable insurance contracts can deposit funds and have the funds invested in a variety of domestic and foreign stocks. See also bond subaccount and money market subaccount.

stop-loss insurance

Insurance purchased by employers that self-insure group health insurance plans so that they can place a maximum dollar limit on their liability for paying claims.

stop-loss provision

A health insurance policy provision which specifies that the policy will cover 100 percent of the insured’s eligible medical expenses after he has incurred a specified amount of out-of-pocket expenses in deductible and coinsurance payments.

stop-loss reinsurance

A type of nonproportional reinsurance providing benefits for all claims that exceed a specified percentage of the total loss incurred above a certain amount during a specified period and/or a maximum dollar amount.

straight life annuity

A type of life annuity contract that provides periodic income payments for as long as the annuitant lives but provides no benefit payments after the annuitant’s death. See also life annuity.

straight life insurance policy

See continuous premium whole life insurance policy.

structured settlement annuity

An immediate annuity issued to a person who is entitled to receive a specified sum of money from a third party; the terms of the annuity contract are structured to carry out the terms of the agreement between the annuitant and the third party.

subaccount

One of several alternative pools of investments within an insurer’s separate or segregated account into which a variable contract owner may allocate premiums paid. Also known as variable investment account and variable subaccount. See also general account, separate account, and segregated account.

subrogation

(1) The legal right given to a creditor to be substituted for another and to succeed to the other’s rights. (2) A legal right that permits an insurer to recover payments made to an insured when the insured received payment for the claim through a separate legal action.

subsidiary

A company that is owned and controlled by another company, but that operates separately from the controlling company.

substandard premium rates

The premium rates charged insureds who are classified as substandard risks. Also known as special class rates.

substandard risk class

In insurance underwriting, the group of proposed insureds who represent a significantly greater-than-average likelihood of loss within the context of the insurer’s underwriting practices. Also known as special class risk. Contrast with declined risk class, preferred risk class, and standard risk class.

substantial assistance

For purposes of the Health Insurance Portability and Accountability Act (HIPAA) in the United States, the type of assistance that a person insured under a long-term care policy must need in order to qualify for payment of policy benefits. The Internal Revenue Service has defined substantial assistance to include both standby assistance and hands-on assistance. See also hands-on assistance and standby assistance.

succession beneficiary clause

See preference beneficiary clause.

successor beneficiary

See contingent beneficiary.

successor payee

See contingent payee.

suicide exclusion provision

A life insurance policy provision stating that policy proceeds will not be paid if the insured dies as the result of suicide as defined within the policy within a specified period following the date of policy issue.

summary plan description

For employee benefit plans, a written document that is understandable by the average plan participant and that reasonably informs participants and beneficiaries about their rights and obligations under the plan. In the United States, the Employee Retirement Income Security Act (ERISA) requires employers that sponsor employee benefit plans to provide employees with a summary plan description.

Superintendent of Insurance

The director of a provincial Office of the Superintendent of Insurance. See also Office of the Superintendent of Insurance.

Superintendents’ Guidelines

A series of recommendations to insurers adopted by the Canadian Council of Insurance
Regulators in cooperation with the Canadian Life and Health Insurance Association (CLHIA).

supplemental coverage

An amount of coverage that adds to the amount of coverage specified in a basic insurance policy.

supplementary notice

In the United States, a notice that the Fair Credit Reporting Act (FCRA) requires underwriters who use consumer and investigative consumer reports to provide insurance applicants with in certain circumstances; this type of notice must be sent within five days of a consumer’s request for information regarding the nature and