BIBF Award for Certified Insurance Practitioner flashcards

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 in which the insured would suffer a genuine economic loss from the destruction of the insured subject, required at policy inception.

Pure risk

A risk that involves only the possibility of loss or no loss, with no chance of gain, and is the primary type of risk insurance is designed to cover.

Moral hazard

A condition of dishonesty or intentional behavior by an insured that increases the likelihood or severity of loss, such as arson or staged theft.

Coinsurance clause

A property policy provision requiring the insured to carry insurance equal to a specified percentage of value; otherwise claim payments are reduced proportionally.

Utmost good faith

A legal doctrine requiring both insurer and applicant to deal honestly and disclose all material facts relevant to the risk being underwritten.

Contract of adhesion

A policy drafted by the insurer with little negotiation, so ambiguous language is generally interpreted in favor of the insured under contra proferentem.

Waiver and estoppel

Waiver is the voluntary relinquishment of a known right; estoppel prevents a party from asserting a right after another party reasonably relied on its conduct.

Material misrepresentation

A false statement of fact that is relevant to the insurer's decision to issue coverage or set premium, and that induces the insurer to act.

Rate adequacy standard

The regulatory requirement that insurance rates be sufficient to cover expected losses and expenses, not excessive, and not unfairly discriminatory among similar risks.

Producer licensing

The statutory process requiring insurance producers to complete education, pass an examination, be appointed by an insurer, and maintain continuing education.

Guaranty association

A statutory entity that pays covered claims of policyholders when an admitted insurer becomes insolvent, subject to state-defined limits and eligibility rules.

Unfair trade practices

Prohibited insurance market conduct such as misrepresentation, twisting, rebating, false advertising, and unfair or deceptive claim settlement practices.

Business income coverage

Property coverage that replaces lost net income and continuing expenses during the period of restoration following a covered property loss.

Claims-made policy

A liability policy that responds to claims first made during the policy period, regardless of when the injury or damage occurred, subject to retroactive date.

Occurrence policy

A liability policy that responds to bodily injury or property damage that occurs during the policy period, regardless of when the claim is reported.

Additional insured

A person or organization added to another's liability policy to receive coverage for liability arising from the named insured's operations or premises.

HO-3 policy

A homeowners form insuring the dwelling and other structures on an open-peril basis while covering personal property on a named-peril basis.

Coordination of benefits

A health insurance provision that determines the order of payment when a person is covered by more than one plan, preventing duplicate recovery.

Universal life insurance

Permanent life insurance with flexible premiums and adjustable death benefit, where cash value earns interest and mortality and expense charges are deducted.

Elimination period

The waiting period after a disability begins before disability income benefits become payable under the policy.

Underwriting decision options

The underwriter may accept the risk as applied for, accept with modification such as exclusions or rate increases, or decline the application.

Facultative reinsurance

Reinsurance arranged case by case for an individual risk, allowing the reinsurer to accept or reject each submission separately.

Loss runs

A report of an applicant's prior claims history, used by underwriters to assess loss experience and predict future claims frequency and severity.

Adverse selection

The tendency of higher-than-average risks to seek insurance more actively, which underwriters counter through screening, exclusions, and experience rating.

Reservation of rights

A written notice from the insurer preserving its right to deny coverage later while it continues investigating a claim.

Subrogation

The insurer's right to pursue recovery from a third party responsible for a loss after the insurer has paid the insured's claim.

Proof of loss

A formal sworn statement from the insured documenting the cause and amount of loss, typically required within a policy-specified period.

Actual cash value

The cost to replace damaged property minus depreciation, reflecting the property's value immediately before the loss.

Quota share treaty

A proportional reinsurance agreement in which the cedent cedes a fixed percentage of every risk in a defined class to the reinsurer.

Excess of loss treaty

A non-proportional reinsurance agreement in which the reinsurer pays losses above a specified retention up to a stated limit per risk or occurrence.

Combined ratio

The sum of the loss ratio and expense ratio; a result above 100 percent indicates an underwriting loss for the insurer.

Fiduciary duty

The ethical and legal obligation of a producer to act in the client's best interest and to hold client funds in trust.