08 Apr 2024
Welcome to InsureTerms
Our partners over at Locke Lord have generously agreed to contribute to the InsurTech NY community with some educational pieces about the insurance industry and commonly used terms in it. We will be adding to this InsureTerms list periodically, so check back for more insights from Locke Lord’s team.
Service Contract
“Service Contract” – also known by its street name “Extended Warranty” – means a contract for which separate consideration is paid by the purchaser and under which the counterparty agrees to replace or repair tangible consumer property or goods because of operational or structural failure due to a defect in materials, workmanship, or normal wear and tear, with or without additional provision for incidental payment of indemnity under limited circumstances. A service contract is a quasi-insurance product in that it is regulated in most states under their insurance codes, and while some states’ service contract laws require licensure or registration of service contract providers or obligors, they are not regulated as insurance companies. In a few states, sales representatives or agents are required to hold a license akin to an insurance producer license.
November 27th, 2024 | Contribution by BCasey@lockelord.com
GLBA
GLBA, the Gramm-Leach-Bliley Act, also known as the Financial Services Modernization Act of 1999, is an act of the 106th United States Congress (1999–2001). Title V thereof established the first comprehensive federal statutory law governing data privacy and security of the non-public personal information of personal, family or household products customers of financial institutions, e.g., banks, credit unions, savings and loan associations, securities brokerages and insurance companies and producers. GLBA delegated the implementation of its data privacy and security, enabling statutes to the relevant functional regulators, which in the case of the insurance industry was the National Association of Insurance Commissioners (NAIC). In 2000, the NAIC promulgated its GLBA regulation, the Privacy of Consumer Financial and Health Information Regulation (Model Law 672-1), which is now under review by the NAIC for upgrades given that the consumer data privacy and security landscape has changed drastically since the year 2000.
August 30, 2024 | Contribution by BCasey@lockelord.com
SAP
Insurance statutory accounting principles for insurance companies which are codified in the National Association of Insurance Commissioners’ Accounting Practices & Procedures Manual, and sometimes by a “permitted practice” of a state insurance department; the term is oftentimes used as an accounting reference for insurance company financial matters in a stock purchase agreement, managing general agreement and reinsurance agreement. SAP is an enterprise liquidation value oriented method of accounting, which is much different than U.S. Generally Accepted Accounting Principles, which an insurance holding company would normally use for preparing its financial statements.
June 27, 2024 | Contribution by BCasey@lockelord.com
MGA
A Managing General Agent, which has both business and legal context meanings. In the business context, an MGA is an insurance producer that, under an agreement with an insurer, has the authority from the insurer to produce insurance business using the insurer’s policy forms and rates, or policy forms and rates developed by the MGA for use in the name of the insurer, and may also handle insurance claims for the insurance policies produced by the MGA. Oftentimes, an MGA will bring a reinsurance company partner to the transaction that will reinsure the “fronting insurer” for which the MGA acts. From a legal perspective, many state insurance departments issue a separate MGA license to a licensed insurance producer where it meets the legal definition of an MGA, which generally is an insurance producer that
- manages all or a part of an insurer’s business,
- annually produces total gross written premiums for the insurer equal to or more than 5% of the insurer’s most recent year-end total policyholders surplus and
- either (i) handles insurance claims for the insurer or (ii) negotiates ceded reinsurance for the insurer.
April 9, 2024 | Contribution by BCasey@lockelord.com