Bulgarian Insurance Broker Qualification Exam key terms

A legally recognised relationship between the policyholder and the subject of insurance such that the policyholder benefits from its preservation or suffers loss from its damage. It must exist when cover is taken out and underpins the validity of the contract.

The rule that a non-life claim payment should restore the policyholder to the financial position held before the loss, no better and no worse. It limits recovery to the actual loss and explains why sums insured, deductibles and underinsurance matter.

The insurer's right, after paying a claim, to step into the policyholder's shoes and pursue third parties responsible for the loss. It prevents double recovery and supports the indemnity principle in non-life insurance.

The maximum amount the insurer will pay under a non-life policy for a defined loss or in total. It is set by the policyholder and, if too low relative to the value at risk, can lead to proportional claim reductions.

The amount stated in a life policy that the insurer will pay on death, survival or another insured event. Unlike a sum insured, it is a fixed promised benefit rather than a cap on reimbursed loss.

A situation where the sum insured is lower than the actual value of the insured property or exposure. Many property policies then reduce the claim payout in proportion to the shortfall, leaving the policyholder bearing part of the loss.

A policy condition applying proportional reduction of a property claim when the sum insured is less than the value of the insured property. The payout is scaled down by the ratio of sum insured to actual value.

The amount of each loss that the policyholder must bear before the insurer pays. It reduces small claims and moral hazard, and it may be compulsory or chosen voluntarily in exchange for a lower premium.

The mutual duty of the parties to an insurance contract to act honestly and disclose material facts. Breach by the policyholder may allow the insurer to reduce or refuse a claim, depending on the law and circumstances.

The prospective policyholder's obligation to tell the insurer, before cover starts, all facts that a prudent insurer would consider relevant to accepting the risk or setting the premium. It is the practical expression of utmost good faith.

Information that would influence a prudent insurer's decision to accept a risk, set terms or charge a premium. Examples include prior claims, hazardous activities and known health conditions. Non-disclosure can affect claim payment.

A false or misleading statement made by an applicant or the insurer during negotiations. If it is material and induced the contract, the affected party may have remedies such as avoidance or claim reduction.

The remedy by which an insurer treats a contract as never having existed, typically for material non-disclosure or misrepresentation. Modern rules often replace automatic avoidance with proportionate remedies based on the insurer's hypothetical response.

A short statutory period after conclusion of a life or long-term policy during which the consumer may withdraw and receive a refund of premiums, subject to any risk cover already provided. It protects consumers from hasty purchases.

The consumer's legal ability to cancel a newly concluded insurance contract within a defined period without penalty, usually by written notice. The insurer may charge for the risk covered before cancellation.

The price the policyholder pays for insurance cover. It is calculated from the assessed risk, expenses, expected claims and profit margin, and non-payment can lead to suspension or termination of cover.

Setting premiums according to the likelihood and severity of the insured event, using factors such as age, occupation, claims history or property construction. It aligns price with expected cost but can raise fairness and discrimination questions.

The insurer's process of evaluating a proposed risk, deciding whether to accept it and on what terms, and setting the premium, exclusions or conditions. It relies on the information disclosed by the applicant.

A clause that removes specified events, causes or circumstances from the cover provided. Exclusions define the boundaries of the risk transferred and must be clear and, where required, brought to the consumer's attention.

The scope of protection a policy provides, describing which insured events, persons, property or liabilities are included and up to what limits. It is read together with exclusions, conditions and deductibles.

The maximum amount the insurer is obliged to pay under a policy or a specific section, whether per claim, per event or in aggregate. It caps the insurer's exposure and may sit alongside sub-limits for particular risks.

The amount a policyholder receives from the insurer if a savings-type life policy is cancelled before maturity. It reflects accumulated reserves, minus charges and any surrender penalties, and may be zero in early years.

A life insurance product that pays a series of regular income amounts, often for the rest of the annuitant's life, in exchange for a lump sum or premiums. It converts savings into retirement income and manages longevity risk.

A life insurance contract whose value is linked to the performance of underlying investment funds chosen by the policyholder. The insurer pays a benefit based on units held, so the investment risk rests mainly with the policyholder.

The possibility that the value of invested premiums, particularly in unit-linked or savings products, falls below expectations. It is borne by the policyholder where benefits depend on fund performance, unlike guaranteed products.

An independent intermediary who acts on behalf of the client, advises on insurance needs and places cover with suitable insurers. The broker must act in the client's best interest and disclose remuneration and conflicts of interest.

An intermediary who acts for one or more insurers in distributing their products, often with authority to conclude cover or collect premiums. The agent must disclose whose interests it represents and any conflicts.

An intermediary who distributes the products of a single insurer or a single group and represents that insurer's interests. The relationship limits product comparison and must be clearly disclosed to the customer before advice.

A situation where an intermediary's own interests, such as commission levels or group ties, could improperly influence the advice or recommendation given to a customer. It must be identified, avoided or disclosed.

The obligation to inform the customer, before the contract is concluded, about the nature and amount of any commission or other payment the intermediary receives in connection with the sale. It supports transparency and informed choice.

A payment made by an insurer to an intermediary, usually calculated as a percentage of the premium, for placing or servicing business. It can create conflicts of interest and must be disclosed to the customer.

The requirement that an intermediary act honestly, fairly and professionally in the customer's best interest when advising or selling insurance. It includes assessing demands and needs and recommending suitable products.

The process of gathering information about the customer's circumstances, objectives and risk exposures to determine which insurance product, if any, is suitable. The result should be documented and explained to the customer.

The degree to which a recommended insurance product matches the customer's stated needs, financial situation and risk profile. Unsuitable recommendations breach conduct rules and may trigger liability or redress.

A standardised disclosure giving the customer essential information about a product, including cover, exclusions, limits, duration, premiums, risks and cancellation rights. It must be clear, fair and not misleading.

The process of disguising the origin of proceeds of crime by placing, layering and integrating them into the legitimate economy. Insurers and intermediaries must detect and report suspicious activity under AML rules.

The identification and verification of customers and beneficial owners, plus assessment of their risk profile, before or during a business relationship. It supports AML, sanctions and fraud controls in insurance distribution.

A confidential report sent to the national financial intelligence unit when an intermediary suspects money laundering or terrorist financing. Reporting is mandatory, and tipping off the customer about it is prohibited.

The provision or collection of funds intended for terrorist acts or organisations, whether from legal or illegal sources. Intermediaries must apply controls and report suspicions to the authorities.

Checking customers, beneficial owners and transactions against national and international sanctions lists before providing cover or making payments. A match may require freezing assets, refusing service or reporting to the competent authority.

Any information relating to an identified or identifiable natural person, such as health data, contact details or claims history. Its processing in insurance must have a lawful basis and respect data subject rights.

Sensitive personal data, including health, genetic and biometric information, that requires stronger legal protection. Insurers often process it for underwriting and claims, relying on specific legal conditions and safeguards.

The set of legal rules governing how personal data is collected, used, stored and shared, giving individuals rights such as access, correction and objection. Insurers must apply privacy by design and security safeguards.

The professional duty not to disclose information learned about a client except with consent or where law permits. It covers health, financial and claims information and underpins trust in insurance distribution.

The standards of honesty, integrity, competence and fairness expected of insurance intermediaries in dealing with customers, insurers and colleagues. Ethical conduct supports fair treatment and complements formal conduct rules.

The body of rules ensuring fair treatment of retail customers, including clear information, fair contract terms, complaint handling and access to redress. It applies throughout the product lifecycle, from design to claims.

The documented process by which an intermediary or insurer receives, investigates and responds to customer complaints within set time limits. Customers must be told about the process and about escalation to the supervisory authority or ombudsman.

The Bulgarian state authority responsible for licensing and supervising insurers, reinsurers and insurance intermediaries, and for enforcing conduct and prudential rules. It can impose measures, fines and licence withdrawals.

The Bulgarian statute that regulates insurance and reinsurance activity, the insurance contract, intermediation, licensing and supervision. It sets the legal framework within which insurers, brokers and agents must operate.

The person who concludes the insurance contract with the insurer and is responsible for paying the premium. The policyholder may differ from the insured person and from the beneficiary who receives the benefit.

The natural or legal person whose life, health, property or liability is covered by the policy. Their interests and disclosures matter to the risk assessment, even where someone else concluded the contract.

The person entitled to receive the insurance benefit when the insured event occurs, especially in life and accident policies. The policyholder usually names the beneficiary and may change the nomination under the policy terms.

Liability cover protecting a professional, such as an insurance broker, against claims for negligence, errors or omissions in the services provided. It is often a mandatory condition for licensing and protects clients.

Cover that pays amounts the insured becomes legally obliged to pay as damages to third parties for bodily injury or property damage, within policy limits. It protects the insured's assets rather than a specific object.

Compulsory cover for the legal liability of a vehicle owner or driver for injury or damage caused to third parties in a road accident. It protects victims and is required for vehicles used on public roads.

The insurer's ability, after paying a claim, to recover the amount from responsible third parties or from other insurers. It includes subrogation and contribution between insurers covering the same loss.