BIA Non-Life Insurance Diploma flashcards
BIA Non-Life Insurance Diploma · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Insurable interest
- A financial or legal relationship to the subject matter such that the insured benefits from its preservation or suffers loss from its damage. Required for a valid non-life contract.
- Indemnity principle
- The insured is restored to their pre-loss financial position, no better and no worse. Valued policies, reinstatement and new-for-old cover are deliberate exceptions.
- Proximate cause
- The dominant, effective cause of a loss, disregarding remote causes. It determines whether a covered peril triggered the loss under the policy.
- Subrogation
- After paying a claim, the insurer acquires the insured's rights of recovery against third parties. Recovery cannot exceed the indemnity paid.
- Contribution
- Where multiple policies cover the same loss, each insurer pays a rateable share. Common methods are independent liability and sum-insured proportion.
- Utmost good faith
- Both parties must disclose material facts a prudent underwriter would consider relevant. The duty applies before formation and at renewal.
- Warranty
- A promissory condition in the policy. Breach discharges the insurer from liability for losses occurring after breach, regardless of causation, subject to statutory reform.
- Condition precedent to liability
- An obligation the insured must satisfy before the insurer's duty to pay arises, such as prompt notification or claims cooperation.
- Avoidance ab initio
- The contract is treated as never having existed, typically for material non-disclosure or misrepresentation. Premiums may be returned depending on the circumstances.
- Treating customers fairly
- A conduct principle requiring fair treatment across product design, sales, servicing and claims, with clear disclosure and accessible complaint routes.
- Product oversight and governance
- Manufacturers must define target markets, test products and monitor outcomes after launch, ensuring products meet identified customer needs.
- Customer due diligence
- Anti-money-laundering process identifying customers, verifying identity, establishing beneficial ownership and screening against sanctions lists before or during the relationship.
- Risk frequency and severity
- Expected loss equals probability of loss multiplied by average loss amount. Frequency and severity drive technical premium and risk selection decisions.
- Moral hazard
- Behavioural risk arising from insurance cover, such as carelessness or exaggeration. Managed through deductibles, conditions and claims scrutiny.
- Probable maximum loss
- An estimate of the largest loss likely from a single event under normal conditions, used to control accumulation and set reinsurance retention.
- Contra proferentem
- Ambiguous policy wording is construed against the party that drafted it, usually the insurer. Clear wording prevails over this rule.
- Average clause
- Underinsurance reduces a claim proportionally: settlement equals loss multiplied by sum insured divided by value at risk.
- Franchise deductible
- Losses below the stated threshold are not payable; losses above it are paid in full without deducting the threshold. Distinct from an excess.
- Aggregation clause
- Groups losses arising from one event or originating cause, determining whether a single limit applies or each loss is treated separately.
- Business interruption formula
- Loss equals reduction in turnover multiplied by gross profit rate, plus increased costs of working, less savings. Measured over the indemnity period.
- Indemnity period
- The maximum period over which business interruption loss is measured, reflecting realistic time to rebuild, re-equip and restore trade.
- Material damage proviso
- A condition requiring the property damage peril to be insured for business interruption cover to respond, ensuring consistent scope.
- Claims-made trigger
- Cover responds to claims first made or notified during the policy period, regardless of when the act occurred, subject to the retroactive date.
- Professional indemnity
- Covers negligent acts, errors or omissions in professional services. Usually written on a claims-made basis with a retroactive date and extended reporting period.
- Public liability
- Covers third-party bodily injury and property damage arising from the insured's premises or operations. Employee injury is usually excluded.
- No-claims discount
- A premium reduction earned for claim-free years. Protected NCD preserves the discount after a limited number of claims.
- Comprehensive motor cover
- Provides own-damage cover plus third-party liability for bodily injury and property damage. Third-party only and third-party fire and theft are narrower levels.
- Quota share treaty
- A proportional reinsurance arrangement where the reinsurer accepts a fixed percentage of premium and losses on all risks within the treaty scope.
- Excess of loss treaty
- Non-proportional reinsurance where the reinsurer pays losses above the cedent's retention up to a limit, per risk or per event.
- Reservation of rights
- A letter preserving the insurer's coverage position while investigation continues. It does not waive defences or confirm cover.
- Case reserve and IBNR
- Case reserves estimate known reported claims; IBNR estimates incurred but not reported claims. Together they form the technical claims provision.
- Combined ratio
- Loss ratio plus expense ratio. A ratio below 100% indicates underwriting profit; above 100% indicates an underwriting loss.