BIBF Award for Certified Insurance Practitioner key terms

A financial or legal stake in the subject matter of insurance such that the insured benefits from its survival and suffers measurable loss from its damage or destruction. It must exist at inception for property cover and at the time of loss for life cover.

The rule that a property or liability claim payment should restore the insured to approximately the same financial position held before the loss, no better and no worse, subject to policy limits and deductibles.

A risk arising from the insured's attitudes, honesty, or behaviour that increases the likelihood or severity of loss, such as carelessness because cover exists or deliberate exaggeration of a claim.

The tendency for people with above-average risk to seek or retain insurance more readily than low-risk persons, especially when insurers cannot accurately distinguish risk levels or price them correctly.

A situation offering only the chance of loss or no loss, with no possibility of gain, such as fire, theft, or liability. This is the type of risk that insurance is designed to transfer.

Uncertainty involving the possibility of either gain or loss, such as investing in shares or launching a business. Insurers generally do not insure it because the loss is not accidental and may be self-inflicted.

A risk management technique in which the financial consequences of a risk are shifted to another party, most commonly by purchasing an insurance policy in exchange for a premium.

The deliberate or unavoidable acceptance of a risk's financial consequences by the party exposed to it, often used for small, frequent losses or when insurance is unavailable or uneconomic.

The mutual duty of insured and insurer to disclose all material facts relevant to a risk fairly and honestly, without being asked, and to avoid misleading the other side.

Any information that would influence a prudent insurer's decision to accept a risk or to set its terms and premium, such as prior claims, convictions, or hazardous activities.

Failure by a proposer to reveal a material fact when applying for insurance, whether unintentional or deliberate, which may entitle the insurer to avoid or adjust the policy.

A false or misleading statement of fact made by an applicant or insurer, whether innocent or deliberate, that induces the other party to enter the contract on terms they would not otherwise have accepted.

A promise or statement in the policy that the insured represents as true or will comply with, such as maintaining a sprinkler system. Breach may suspend or void cover depending on the jurisdiction and clause wording.

A policy provision that sets out obligations, procedures, or circumstances affecting cover, such as notifying claims, paying premiums, or maintaining protective safeguards.

The effective, dominant, and operative cause of a loss, without which the loss would not have occurred. Insurers use it to decide whether the loss falls within the perils insured.

The insurer's right, after paying a claim, to step into the insured's shoes and recover the loss from the party legally responsible, preventing the insured from recovering twice.

The excess of an insurer's admissible assets over its required liabilities and reserves, used by regulators as a buffer ensuring the company can meet obligations to policyholders in adverse conditions.

The reserves an insurer must hold to meet expected policyholder obligations, calculated as a prudent estimate of future cash flows plus a risk margin where required by the regulatory regime.

Regulatory arrangements, such as guarantee funds or compensation schemes, that protect insureds if an insurer becomes insolvent and cannot pay claims.

The requirement that an insurer hold sufficient capital, measured against its risk profile, to absorb unexpected losses. It is assessed through regulatory capital models or standard formulas.

The insurer's own obligation to disclose material information to the insured, such as unusual policy terms, exclusions, or the financial state of the company in some regimes.

A property policy clause under which the insured shares a proportion of each loss if the sum insured falls below an agreed percentage of the property's value at risk.

A condition that reduces a claim payment in proportion to underinsurance, calculated by multiplying the loss by the sum insured divided by the required value of the property.

Arises when the sum insured is less than the full value of the property or the amount needed to rebuild it, leaving the insured to bear part of any loss.

The cost to repair or replace damaged property less an allowance for depreciation, reflecting its value in its pre-loss condition rather than the price of a new equivalent.

The amount needed to replace or rebuild damaged property with new materials of like kind and quality, without deduction for depreciation, usually subject to a specified limit.

An accident, event, or continuous exposure that causes bodily injury or property damage during the policy period, regardless of when the claim is reported, in occurrence-based liability cover.

A liability policy that responds to claims first made and reported during the policy period, often with a retroactive date, rather than to incidents occurring during that period.

The number of deaths in a defined population during a period, usually expressed per thousand lives, used to price life cover and set premium assumptions.

The frequency of illness or injury in a population over a period, used by health and disability insurers to estimate claim costs and set premiums.

The amount paid by the insured to the insurer in exchange for cover, calculated from the risk, expenses, profit, and any applicable taxes or levies.

The maximum amount the insurer will pay under a policy, or the amount used to calculate benefits, such as the face amount of a life policy or the limit on a property policy.

The process of grouping applicants into similar-risk categories using factors such as age, health, occupation, or claims history, so that each group pays a premium reflecting its expected loss experience.

The process of evaluating a proposed risk, deciding whether to accept it, on what terms, and at what premium, and applying exclusions, limits, or conditions to manage the exposure.

An amount set aside by an insurer to meet the estimated cost of reported but unsettled claims and incurred but not reported losses, including a margin for uncertainty.

The residual value of damaged property that the insurer may take over after paying a total or partial loss, and may sell to reduce the net cost of the claim.

A transaction in which an insurer transfers part of its risk to another insurer, the reinsurer, in exchange for a share of the premium, improving capacity and protecting solvency.

The amount of risk an insurer keeps for its own account after ceding part of it to reinsurers, whether expressed as a fixed sum or a percentage of each risk.

A situation in which a person's personal, financial, or other interests could improperly influence their professional judgement or duties, requiring disclosure and management.

A legal obligation to act in the best interests of another party, such as a client or policyholder, with loyalty, care, and transparency, placing the client's interests above one's own.