CII I10 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Utmost good faith

A mutual duty of the insurer and insured to deal openly and fairly. Its content for disclosure and representation is now governed by CIDRA 2012 for consumers and the Insurance Act 2015 for business risks.

Duty of fair presentation

Insurance Act 2015 duty on a non-consumer insured to disclose every material circumstance it knows or ought to know, or to give sufficient information to put a prudent insurer on notice to enquire further.

Material circumstance

A fact that would influence the judgement of a prudent insurer in deciding whether to accept the risk, what premium to charge, or what terms to impose.

Qualifying misrepresentation

Under CIDRA 2012, a false statement made by a consumer that is deliberate or reckless, or careless, and that induced the insurer to enter the contract on those terms.

Proportionate remedy

Insurance Act 2015 approach for careless breach of fair presentation: the insurer may avoid the policy, impose different terms, or reduce a claim proportionately to reflect what it would have done.

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 at inception for life, at loss for indemnity cover.

Indemnity principle

The insured is restored to the same financial position as before the loss, no better and no worse. Sum insured, average, limits and excesses modify the amount actually paid.

Subrogation

After paying a claim, the insurer acquires the insured's rights of recovery against a third party responsible for the loss, limited to the amount paid and subject to the insured's prior recovery.

Contribution

Where two or more policies cover the same interest against the same peril, each insurer pays its rateable share so the insured receives one indemnity and never profits from the loss.

Average clause

If the sum insured is less than the value at risk, the claim is reduced in the same proportion: claim paid equals loss multiplied by sum insured divided by value at risk.

Reinstatement cover

A property basis of claim settlement that pays the cost of rebuilding or replacing the damaged property with new equivalent property, rather than its depreciated market value.

New for old

A household policy basis where damaged items are replaced with new equivalents without deduction for wear and tear, typically subject to a sum insured adequate for replacement cost.

Salvage rights

After paying a total loss, the insurer may take ownership of the damaged property's residual value, reducing the net cost of the claim.

Abandonment

The insured's offer to surrender damaged property to the insurer in return for a total loss payment; the insurer is not obliged to accept, and no notice of abandonment is needed for non-marine property.

Proximate cause

The dominant, effective cause of a loss, as opposed to the last event in a chain. Coverage depends on whether that cause is an insured peril, an excluded peril or uninsured.

Warranty

A promise by the insured that must be strictly complied with. Under the Insurance Act 2015, breach suspends cover only for the period and scope affected, rather than automatically ending the policy.

Condition precedent

A policy term that must be satisfied before the insurer's liability arises, such as providing notice of a claim within a stated time or complying with a claims cooperation clause.

Exclusion clause

A term that removes specified perils, property, persons or circumstances from cover. It is construed narrowly against the insurer that drafted it.

Contra proferentem

The rule that an ambiguous policy term is interpreted against the party who drafted it, usually the insurer, so ambiguity in an exclusion favours the insured.

Insurer's duty to pay

Under the Enterprise Act 2016, an insured can claim damages for an insurer's unreasonable delay in paying a valid claim, in addition to the claim amount itself.

Third Parties (Rights against Insurers) Act 2010

Allows a third party with a judgment against an insolvent insured to claim directly against the insurer, without first suing the insolvent insured.

Financial Services and Markets Act 2000

The statutory framework under which the FCA regulates insurers and brokers, including the Insurance Conduct of Business sourcebook rules on fair treatment of customers.

Consumer Insurance (Disclosure and Representations) Act 2012

Statute that abolished the consumer duty to volunteer information, replacing it with a duty to take reasonable care to answer the insurer's questions fully and accurately.

Insurance Act 2015

Statute reforming business insurance law: fair presentation, proportionate remedies, transparency of terms not relevant to the loss, and suspension of cover for breach of warranty.

Enterprise Act 2016

Statute implying a term into every insurance contract that the insurer must pay a valid claim within a reasonable time, giving the insured a damages remedy for unreasonable delay.

Marine Insurance Act 1906

Codifies marine insurance principles including insurable interest, warranties, proximate cause, sue and labour, and subrogation; many terms influence general insurance practice.

Life Assurance Act 1774

Requires insurable interest at the inception of a life policy and prohibits policies on lives where no interest exists, to prevent gambling on the life of another.

Estoppel

A legal bar preventing a party from asserting a right after having led the other party to act on a representation, such as an insurer that accepted premiums while aware of a breach.

Misrepresentation

A false or misleading statement of fact made before the contract that induces the other party to enter it; remedies depend on whether it was deliberate, reckless, careless or innocent.

Non-disclosure

Failure to disclose a material fact to the insurer before the contract is formed; for consumers under CIDRA 2012 only if it breaches the duty to take reasonable care.

Innocent misrepresentation

A false statement made without negligence or intent to deceive; under CIDRA 2012 the insurer's remedy is limited to proportionate reduction of the claim or, sometimes, cancellation.

Insurance Ombudsman

The Financial Ombudsman Service resolves disputes between eligible complainants and insurers, applying what is fair and reasonable, with a free-to-consumer process and a monetary award limit.