Plain-English definitions for the terms used throughout this resource. Search by word, or filter by topic.
A rate that is neither excessive, inadequate, nor unfairly discriminatory, based on sound actuarial estimates of future cost.
It is the legal and economic standard for setting insurance rates in Texas.
The value of damaged property at the time of loss, typically replacement cost minus depreciation.
It affects how much a policyholder receives for a covered claim.
Claims plus expenses divided by premiums earned. A figure above 100% indicates an underwriting loss.
It is the more complete measure of insurer underwriting performance and a better tool than pure loss ratio for affordability policy.
The amount a policyholder pays out of pocket on a covered claim before insurance pays.
Deductible choices affect premium and shape consumer cost-sharing.
A written addition to a policy that changes its terms, scope, or coverage.
Endorsements determine what is and is not covered for a given policyholder.
A loss type or condition specifically not covered by the policy.
Exclusions affect availability of coverage for specific risks.
Operating expenses divided by premiums earned. Captures the cost of running an insurance company.
It is one of the two components of the combined ratio.
A regulatory framework where insurers file rates with the regulator and may use them, subject to ongoing oversight and disapproval authority.
It is the system Texas uses to balance regulatory oversight with market competition.
A score based on credit-related and other information used to help predict the likelihood of future claims.
It is a tool for risk-based pricing within legal guardrails.
The share of premium that an insurer pays out in claims.
Looking at loss ratio alone — without expenses — can mislead policymakers about insurer performance.
How insurers handle claims, market policies, and treat consumers — overseen by TDI in Texas.
It is a key consumer-protection tool inside the regulatory framework.
Steps taken before a loss to reduce its likelihood or severity, such as resilient roofs or stronger building codes.
Mitigation lowers the underlying cost of risk and is one of the most durable affordability levers.
The standardized contract language that defines what an insurance policy covers.
Forms require TDI approval before they can be used in the Texas market.
The amount a policyholder pays for insurance coverage over the policy period.
Premiums must be adequate to fund expected claims, expenses, and solvency needs.
A regulatory framework where rates must be approved by the regulator before they can be used.
Compared with file-and-use, it can slow market response to changing risk and cost trends.
Claims paid divided by premiums earned. It excludes the cost of running the business.
Used alone, it understates the true cost of providing coverage and can distort affordability debates.
The price per unit of insurance exposure, used together with exposure to calculate premium.
Rate adequacy is the foundation of a healthy, available insurance market.
Insurance purchased by insurers to transfer a portion of their risk, especially for catastrophic events.
Global reinsurance pricing flows into the cost of catastrophe-exposed coverage in Texas.
The cost to repair or replace damaged property with materials of like kind and quality, without depreciation.
It affects how fully a policyholder is made whole after a loss.
Funds set aside by an insurer to pay future claims, including those incurred but not yet reported.
Reserves are how insurers keep their promise to pay future claims.
A state-backed mechanism that provides coverage for risks the voluntary market is not writing.
Residual markets grow when the voluntary market contracts — often a sign of pressure on availability.
The ability of an insurer to meet long-term financial obligations to policyholders.
Solvency is consumer protection — an insurer that cannot pay claims helps no one.
The amount by which an insurer's assets exceed its liabilities — a cushion against unexpected losses.
Surplus is what allows insurers to absorb catastrophic events and keep writing.
The process of evaluating, classifying, and pricing insurance risk.
Underwriting standards shape who can get coverage and at what price, directly affecting availability.
