cost index: A way to compare the costs of similar plans of life insurance. A policy with a smaller index number is generally a better buy than a comparable policy with a larger index number.
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cost containment: Reduction of inefficiencies in the consumption, allocation, or production of health care services. Inefficiencies can occur when health services are used inappropriately; when health services could be delivered in less costly settings; and when the costs could be reduced by using a different combination of resources.
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coordination of benefits (COB): Method of integrating benefits payable under more than one health insurance plan so that the insured persons benefits from all sources do not exceed 100 percent of allowable medical expenses or eliminate incentives to contain costs.
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convertible term insurance: Term insurance that offers the policyholder the option of exchanging it for a permanent plan of insurance without evidence of insurability.
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conversion privilege: Right given to an insured person under a group insurance contract to change coverage, without evidence of medical insurability, to an individual policy upon termination of the group coverage. The conditions under which conversion can be made are defined in the master policy.
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conventional health plan: Plan that provides all benefits and issues certificates containing the insurance company’s guarantees.
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contributory plan: Group plan under which the insured shares in the cost of the plan with the policyholder.
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contract underwriting: The analysis of and lending decision on loans by an insurer on behalf of a lender.
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contingency reserve: A reserve for losses in excess of those that are expected. An insurer generally contributes up to 50% of premiums earned in any year to this reserve, and amounts contributed are to remain there for 10 years, subject to transfer to the surplus account either at the end of that period or before to the extent that the loss ratio exceeds 35% in any given year. Federal income taxes on amounts in the contingency reserve are deferred as long as the funds remain allocated there and are paid when they are transferred to surplus (see tax and loss bonds).
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contingency reserve: A statutory reserve established to absorb unexpected losses. Bond insurers are required to maintain reserves based on premiums written and principal insured. The contingency reserve may be used to pay claims when losses exceed 35% of earned premium for municipal and utility first mortgage obligations or 65% of earned premium for nonmunicipal obligations.
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