CII I10 key terms

The duty on both insured and insurer to deal openly and honestly with each other and to disclose all facts that would influence the other's decision to accept or price the risk.

The insured's obligation under the Insurance Act 2015 to give the insurer a fair presentation of the risk before the contract is agreed, covering every material circumstance the insured knows or ought to know.

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

Failure by the insured to reveal a material fact at proposal stage. The remedy now depends on what the insurer would have done had the fact been disclosed, not automatic avoidance.

An untrue or misleading statement of fact made to the insurer before the contract is formed. If made deliberately or carelessly, it can allow the insurer to avoid the policy or adjust the claim.

The Insurance Act 2015 approach to breach of fair presentation: the insurer's remedy scales with the insured's culpability, from no remedy for innocent breach to avoidance for deliberate breach.

The right of an insurer to treat a contract as though it never existed, usually for deliberate or reckless breach of the duty of fair presentation, returning the premium in some cases.

A legal or financial relationship to the subject matter such that the insured benefits from its safety and suffers loss from its damage, required at the time of insurance.

The principle that insurance restores the insured to the financial position held before the loss, no better and no worse, subject to policy limits and excesses.

An improvement in the insured's position caused by replacing old property with new, which insurers usually deduct so that the indemnity principle is preserved.

The insurer's right, after paying a claim, to step into the insured's legal shoes and pursue third parties who caused the loss, recovering up to the amount paid.

The right of one insurer to recover a share from another insurer that also covers the same loss, so that the insured cannot recover more than the actual loss.

Cover taken out with more than one insurer for the same interest and same risk, where the total sum insured exceeds the value of the subject matter.

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

The dominant, effective cause of a loss that sets in motion the chain of events leading to damage, used to decide whether an insured peril or exclusion applies.

A specified event or circumstance listed in the policy as one for which the insurer will pay, such as fire, theft or storm.

A clause that removes specified losses, causes or circumstances from the cover otherwise granted by the policy, so no payment is due for those situations.

A policy term the insured must comply with exactly. Under the Insurance Act 2015, breach suspends cover rather than automatically discharging the insurer, and can be remedied.

A term that must be satisfied before the insurer's liability arises or before a claim is payable, such as notifying a claim within a stated period.

A statement of fact made during negotiations that induces the insurer to enter the contract. If untrue, remedies range from avoidance to proportionate adjustment.

The specific property, liability, life or interest that the policy is written to protect and that defines the scope of cover.

The maximum amount the insurer will pay under the policy, whether stated as a fixed figure, a limit of indemnity or an aggregate across a period.

The cap on the insurer's liability for a single claim or for all claims in a period, common in liability policies, sometimes stated as any one occurrence and in the aggregate.

The first amount of each claim that the insured must bear personally before the insurer pays anything, sometimes called a deductible in commercial policies.

A threshold amount below which no claim is paid at all, but once exceeded the insurer pays the full claim without deducting the threshold.

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

The insured's duty to tell the insurer about a loss or circumstance promptly and in the manner the policy requires, often a condition precedent to payment.

The rule that ambiguity in a policy wording is construed against the party who drafted it, usually the insurer, and in favour of the insured.

Legislation governing consumer insurance that replaced the consumer's duty to volunteer information with a duty to take reasonable care to answer the insurer's questions accurately and completely.

UK statute reforming commercial insurance law, introducing fair presentation of risk, proportionate remedies, changes to warranties and terms not relevant to the loss.

A policy term that, if breached, would reduce the risk of a particular type of loss but did not do so on this occasion; the insurer cannot rely on it to refuse a claim.

Legislation allowing a third party with a judgment against an insolvent insured to pursue the insurer directly for the insured's liability cover.

Cover protecting the insured against legal liability to third parties for injury, death, property damage or financial loss, up to the limit of indemnity.

The UK dispute-resolution body for complaints about regulated financial firms, including insurers, which can award compensation up to a published limit.

The Bank of England body that regulates the financial soundness of insurers, setting capital, governance and risk-management requirements for the market.

The UK regulator responsible for conduct in insurance markets, including fair treatment of customers, product governance and claims handling standards.

The EU-derived prudential regime setting capital requirements, governance and risk-management standards for insurers, implemented in the UK and retained with amendments.