F

Face Amount. The payment amount set forth on the cover page of a life insurance policy as payable in the event of the death of the insured or upon maturity of the policy.

Factory Mutuals. Mutual insurers that insure factories and other business establishments and attempt to achieve favorable underwriting results through loss prevention techniques.

Facultative Reinsurance. The reinsurance of a specifically identifiable risk by a cedant on terms and conditions agreed upon by the reinsurer specifically for that risk.

Failed Promises. A report issued in February, 1990, by the Subcommittee on Oversight and Investigations of the U.S. House Committee on Energy and Commerce (the Dingell Committee), which examined U.S. insurer insolvencies and detailed deficiencies in the prevailing solvency regulatory system.

FAIR Plans. Plans that make property insurance available to urban property owners who are unable to obtain coverage in standard markets. FAIR (Fair Access to Insurance Requirements) Plans were created pursuant to the Urban Property and Reinsurance Act of 1968.

FASB. See Financial Accounting Standards Board.

Farm Mutuals or Farm Bureau Mutuals. Regional mutual insurers providing coverage to farms and other agricultural activities.

Fault Liability System. See Tort Liability System.

Federal Crime Insurance Program. A program created by federal legislation in 1971 that provides limited coverage for crime-related losses where coverage is not available in standard markets.

Federal Insurance Administration. A federal agency that administers the Federal Crime Insurance Program and the National Flood Insurance Program. See also Federal Crime Insurance Program and National Flood Insurance Program.

Federal Insurance Solvency Act of 1992. Federal legislation introduced by Representative John Dingell (D-Mich.) calling for a federal role in the solvency regulation of insurers and for the regulation of professional reinsurers.

Federally Qualified HMOs. HMOs that meet certain federally stipulated provisions aimed at protecting consumers, e.g., providing a broad range of basic health services, assuring financial solvency and monitoring the quality of care. HMOs must apply to the federal government for qualification.

Fee-for-Service (FFS). A method of payment to providers based on charges for each service provided. A set schedule of charges may be used. Sometimes used as a synonym for traditional "indemnity" plans. Payment may be made by an insurance company, the patient or a government program such as Medicare or Medicaid.

Fee-for-Service Plan (Traditional Indemnity Plan). A health insurance plan in which patients may select any doctor or hospital, and providers bill the patient or the insurance company their normal fees for their services. Providers have no relationship with the health plan, although most submit claims and accept payments from the plan on behalf of the patient. Coverage usually is provided for conditions caused by illness or injury and related diagnostic tests, and usually excludes routine screening and preventive care/checkups.

Fee Schedule. A listing of accepted fees or established allowances for specified medical procedures. As used in medical care plans, it usually represents the maximum amounts the program will pay for the specified procedures.

FFS. See Fee-for-Service.

Fidelity Bond. An instrument that provides protection to an employer against loss caused by the dishonest or fraudulent acts of employees.

Fiduciary Bond. A surety bond required of executors, trustees and other fiduciaries that guarantees the performance of their duties; also known as a probate bond.

Field Office. An insurer's branch office.

50/50 Rule. Federal regulation requiring that MCO plans maintain commercial membership at least equal to their Medicare enrollment.

File and Use Laws. Legislation that enables insurers to implement rate changes upon filing with insurance regulators. This contrasts with prior approval laws, which require prior regulatory approval before rate changes may be implemented.

Financial Accounting Standards Board (FASB). A self-regulatory organization that establishes financial accounting and reporting standards.

Financial Guaranty. The promise to make payments to the holder of a debt, loan or other similar financial instrument in the event the borrower or underlying obligor fails to do so.

Financial Reinsurance. A reinsurance transaction that provides financial benefits to the cedant as its primary purpose.

Financial Responsibility Laws. Legislation that requires automobile owners to provide evidence of their ability to pay damages up to certain required levels.

Finite Risk Insurance. A form of insurance or reinsurance transaction in which only a limited amount of risk is transferred. As is the case with financial reinsurance, a primary objective of such a transaction is to provide financial benefits to the cedant or insured.

Fire Insurance. A form of insurance that provides coverage for damage to buildings resulting from fire, lightning, windstorm and certain other perils.

First Dollar Coverage. Insurance coverage that provides payment without any deductible.

First Party Coverage. Insurance that applies to the insured's own property or person.

Fixed Annuity. An annuity, either deferred or immediate, where the deposits are accumulated at a fixed rate of interest or immediate payments are constant for the duration of the contract. Also, referred to as "book value" products. The insurance company is liable for payment of the accumulated value less any surrender charge at any time.

Flexible Benefit Plan. See Cafeteria Plan.

Flexible Premium Deferred Annuity (FPDA). An annuity that permits annual premium payments in such amounts as the holder deems appropriate; also known as a 403(b) annuity from the section of legislation.

Flex-Rating Laws. Legislation that enables insurers to implement rate changes within certain parameters. If proposed changes in rates exceed such parameters, prior regulatory approval is required. See also File and Use Laws and Prior Approval Laws.

Floater. A form of insurance that covers movable property within the territorial limits and subject to the terms and conditions established by the policy. The term is derived from the fact that the insurance "floats" with the property.

Flood Insurance. A form of insurance covering losses from floods.

Following Form. A type of umbrella or excess liability insurance policy that follows the underlying policy terms.

"Follow the Fortunes" Clause. A clause often contained in a reinsurance treaty under which the reinsurer agrees to cover all losses within the terms of the underlying policy, thereby following the fortunes of the cedant.

Foreign Credit Insurance Association. A consortium of insurers that provides export credit and political risk insurance for U.S. exporters of goods and services.

Foreign Insurer. An insurer transacting business in a jurisdiction other than the state in which it is domiciled.

Formulary. A list of selected pharmaceuticals and their appropriate dosages felt to be the most useful and cost-effective for patient care. Organizations often develop a formulary under the aegis of a pharmacy and therapeutics committee. In HMOs, physicians often are required to prescribe from the formulary.

Forum Shopping. The practice by litigants and their counsel to select a favorable forum for the adjudication of a legal action.

401(k) Plan. A tax-qualified defined contribution retirement plan offered by a corporation and funded by employees' pretax contributions. Typically permits employees to defer a limited amount of their pretax salary into any of several diversified investment options. Investments build up tax-free until distributed, and corporate sponsors often match part or all of employees' contributions with tax-deductible corporate contributions. See also Keogh Plan.

403(b) Plan. A voluntary "quasi-group" tax-qualified plan generally sold on a payroll deduction basis to teachers, government employees and employees of hospitals and nonprofit organizations, and often viewed as an alternative to 401(k) plans. Premiums paid by such organizations on an annuity contract for an employee are not taxable and, like other annuities, the inside build-up is tax-deferred. Also referred to as Tax-Qualified Annuities (TQAs) or Tax-Sheltered Annuities (TSAs).

404(c). The section of the ERISA code, clarified by Department of Labor regulations, that describes employers' (and other plan fiduciaries') role and ultimate potential liability for employees' inappropriate investment decisions under defined contribution plans, and the conditions under which employers may be relieved of liability.

457 Plan. A tax-qualified deferred compensation retirement plan offered to employees by state or local governments, municipalities and organizations that obtain their funding from government sources.

FPDA. See Flexible Premium Deferred Annuity.

Fraternal Insurer. A mutual insurer that provides coverage to members of religious, charitable and fraternal organizations.

Frequency. The number of losses occurring within a given time period. Thus, an insurer is said to have a "frequency problem" if its operating results are adversely affected by a large number of relatively small losses. This contrasts with a "severity problem."

"Fresh Start." A special provision of the Tax Reform Act of 1986 allowing for a phase-in of discounting of loss reserves.

Fronting. The issuance of insurance policies by an insurer as an accommodation to another insurer. Usually, the insurer providing the fronting facility cedes all or substantially all the risk, as well as a significant percentage of the premium, to the insurer being accommodated. This device often is used to enable an insurer to underwrite risks in a jurisdiction in which it is not licensed.

Fronting Company. An insurer that fronts insurance policies for the benefit of another insurer.

Full-Risk Capitation. A form of managed Medicaid initiative, under which states pay HMOs (or occasionally health insuring organizations, essentially at-risk intermediaries not integrated with its contracted providers) on a capitated basis to provide a comprehensive set of Medicaid services.

Funds Held Account. An account maintained by a cedant to cover unearned premiums or other reserves.