BIA Non-Life Insurance Diploma key terms

A legal principle requiring both insurer and policyholder to deal honestly and disclose all material facts relevant to the contract, without being asked, before cover begins and throughout the relationship.

A financial or legal stake in the subject matter of insurance such that the insured benefits from its continued existence or suffers loss from its damage, destruction or liability arising.

The principle that a property or liability claim payment should restore the insured to the financial position held before the loss, neither enriching nor impoverishing them, subject to policy limits and deductibles.

Any information that would influence a prudent insurer's decision to accept a risk or to set the premium and terms, and which the proposer is expected to disclose during underwriting.

Failure by a proposer or insured to reveal a material fact to the insurer, whether deliberate or accidental, which may entitle the insurer to avoid the policy or reduce a claim.

The dominant, effective and operative cause of a loss, the one that sets the chain of events in motion without a new intervening cause breaking that chain.

A risk that meets criteria insurers can accept, typically being measurable, fortuitous, numerous enough to pool, independent of the insured's control and not catastrophic to the whole pool at once.

The process of combining many similar but independent exposures so that the contributions of the many fund the losses of the few, making outcomes more predictable for the insurer.

A statistical principle stating that as the number of similar independent exposure units increases, actual loss experience converges towards the expected average, improving predictability for insurers.

The tendency of a person to behave less carefully or more recklessly because insurance will bear the financial consequences, or to fabricate or exaggerate a loss deliberately.

Carelessness or indifference towards loss arising from the mere existence of insurance cover, such as leaving premises unlocked, without any dishonest intent to gain.

The amount of each loss the insured must bear before the insurer pays, reducing premium and discouraging small claims while sharing risk with the policyholder.

A sum the insured contributes towards each claim, often applied per occurrence or per section, above which the insurer responds up to the policy limit.

The maximum amount the insurer will pay under a policy or section for a covered loss, and the figure used to calculate premium and to test for underinsurance.

A policy condition that reduces a property claim in proportion to underinsurance, comparing the sum insured with the value at risk at the time of loss.

A situation where the sum insured is lower than the true value or replacement cost of the insured property, so that claim payments fall short of the actual loss.

An improvement in the insured's position when a claim payment provides new-for-old replacement, which insurers may reduce by depreciation so the insured does not profit from loss.

A basis of property settlement where the insurer pays to rebuild or replace damaged property with new equivalent property, rather than paying the depreciated market value.

Cover that compensates a business for lost trading profit and continuing fixed costs when physical damage at the premises or a specified supplier or customer site interrupts operations.

In business interruption insurance, the difference between turnover and the variable costs of generating that turnover, representing the funds available to meet fixed costs and profit.

The maximum period after a loss during which business interruption cover responds, beginning when the damage occurs and ending when trading returns to its pre-loss level.

Liability cover protecting a business against claims from third parties for bodily injury or property damage arising from its premises, operations or employees.

Cover for legal liability arising from goods supplied, sold or repaired by the insured that cause injury or damage to third parties after leaving the insured's control.

Compulsory or voluntary cover protecting an employer against claims from employees for injury, disease or death arising out of and in the course of their employment.

Any person or organisation other than the insured and the insurer who may claim against the insured for injury or damage caused by the insured's activities.

The maximum total amount an insurer will pay across all claims during a policy period, distinct from a per-occurrence limit that applies to each individual claim.

The monetary ceiling stated in the policy that caps what the insurer pays for a claim or series of claims, often expressed per occurrence, per person or in aggregate.

A policy term that the insured promises to satisfy, where breach can entitle the insurer to reject a claim, even where the breach is unrelated to the loss.

A policy requirement that must be fulfilled before the insurer's liability arises, such as maintaining protective safeguards or notifying a claim promptly.

The insurer's right, after paying a claim, to step into the insured's shoes and pursue recovery from the party legally responsible for the loss.

The principle allowing an insurer that has paid a claim to recover a proportionate share from other insurers that also cover the same loss under separate policies.

Insurance purchased by an insurer to transfer part of its accepted risk to another insurer, protecting solvency and enabling it to write larger or more concentrated exposures.

A reinsurance arrangement negotiated separately for each individual risk, giving the reinsurer the right to accept or decline each submission and the cedant freedom to offer or not.

A standing agreement under which the reinsurer automatically accepts all risks within a defined class and limits that the cedant writes during the treaty period.

The excess of an insurer's admissible assets over its liabilities, required by regulators to be maintained above a minimum level as a buffer against adverse experience.

The liabilities an insurer recognises for its insurance obligations, comprising best-estimate reserves for outstanding claims and unearned premium plus a risk margin.

Claims that have occurred before the valuation date but have not yet been notified to the insurer, requiring estimation within reserves for outstanding claims.

A performance measure calculated as incurred claims divided by earned premium, showing the proportion of premium consumed by claims before expenses are considered.

The sum of the loss ratio and the expense ratio, indicating underwriting profitability when below one hundred per cent and an underwriting loss when above it.

A situation where a person's private interests or duties to others could improperly influence their professional judgement, requiring disclosure and management under a code of conduct.

A market conduct principle requiring firms to deliver fair outcomes for customers across product design, sales, claims and complaints, not merely to comply with minimum rules.

A false or misleading statement made during the insurance process, whether innocent, negligent or deliberate, which may affect the validity of cover or a claim.

Deliberate deception by a claimant seeking payment to which they are not entitled, such as staging an incident, exaggerating damage or submitting false supporting documents.