What Is a Loss Leader Strategy? A loss leader strategy involves selling a product or service at a price that is not profitable but is sold to attract new customers or to sell additional products and services to those customers. Loss leading is a common practice when a business first enters a market. A loss
What Is Loss Management? The term loss management refers to a set of business practices that are used to monitor, detect, correct, or control sources of financial damage to a company’s earnings. Improvements aimed at loss management involve changes in a business’s operating policies, processes, and practices in order to minimize instances of loss. As
What Is a Loss Payable Clause? A loss payable clause is an insurance contract endorsement where an insurer pays a third party for a loss instead of the named insured or beneficiary. The loss payable provision limits the rights of the loss payee to be no higher than the rights guaranteed to the insured. A
What Is a Loss Portfolio Transfer (LPT)? A loss portfolio transfer (LPT) is a reinsurance contract or agreement in which an insurer cedes policies, often ones that have already incurred losses, to a reinsurer. In a loss portfolio transfer, a reinsurer assumes and accepts an insurer’s existing open and future claim liabilities through the transfer of
What Is Loss Aversion? Loss aversion in behavioral economics refers to a phenomenon where a real or potential loss is perceived by individuals as psychologically or emotionally more severe than an equivalent gain. For instance, the pain of losing $100 is often far greater than the joy gained in finding the same amount. The psychological
What Is a Loss Ratio? Loss ratio is used in the insurance industry, representing the ratio of losses to premiums earned. Losses in loss ratios include paid insurance claims and adjustment expenses. The loss ratio formula is insurance claims paid plus adjustment expenses divided by total earned premiums. For example, if a company pays $80
What Is a Loss Reserve? A loss reserve is an estimate of an insurer’s liability from future claims it will have to pay out on. Typically composed of liquid assets, loss reserves allow an insurer to cover claims made against insurance policies that it underwrites. Estimating liabilities can be a complex undertaking. Insurers must take into
What is Loss Settlement Amount? Loss settlement amount is a term used to denote the amount of a property insurance settlement, whether real estate or personal property. The loss settlement amount largely depends on which type of loss cost settlement option a policyholder has agreed to in their homeowner’s insurance policy. How Loss Settlement Amount Works The loss settlement
What Is a Lost Policy Release (LPR)? A lost policy release (LPR) is a statement releasing an insurance company from its liabilities. An LPR is signed by the insured party and signifies that the policy in question has been lost or destroyed or is being retained. Historically, an insured party that wanted to cancel an insurance policy
What Are Longevity Derivatives? Longevity derivatives are a class of securities that provide a hedge for parties exposed to longevity risks through their businesses, such as pension plan managers and insurers. These derivatives are designed to deliver increasingly high payouts as a selected population group lives longer than originally expected or calculated. Key Takeaways Longevity derivatives
