CII IF1 key terms

A clear statement by one party of the terms on which they are willing to be bound, made with the intention that a binding contract will arise once the other party accepts it.

An unqualified agreement to every term of an offer, communicated to the person who made it. Once acceptance occurs, a binding contract generally comes into existence.

Something of value that each party gives in exchange for the other's promise, such as money, goods or a service. Without it a promise is generally not enforceable in English law.

A statement that invites other people to make an offer rather than being an offer itself, such as goods displayed in a shop or an advertisement.

The requirement that the parties to an agreement mean it to have legal consequences. It is presumed in commercial dealings but usually not in purely social or domestic arrangements.

A false statement of fact made by one party before a contract is formed which induces the other party to enter into it. It can make the contract voidable and lead to damages.

Where one person uses a position of trust or dominance over another to persuade them into a transaction that is not the product of their own free choice.

An agreement that the law treats as never having existed, so that neither party can enforce it. Common causes include illegality, uncertainty and a lack of capacity.

A valid contract that one party is entitled to cancel because something went wrong at the outset, such as misrepresentation. Until it is cancelled it remains fully binding.

A term or event that must be satisfied before a contractual obligation arises, or before cover under an insurance policy will operate.

A relationship in which one person, the agent, is authorised to act for another, the principal, and can create legal rights and duties between the principal and third parties.

A term in a contract that seeks to limit or exclude one party's liability. Whether it works depends on it being properly incorporated, clearly worded and fair under statute.

A tort in which one party fails to take reasonable care, breaking a duty of care owed to another and causing loss or injury that was reasonably foreseeable.

A person has insurable interest in something where they would suffer financial loss if it were damaged or lost, or would gain from its continued existence. It is needed for valid insurance.

The principle that insurance should put the insured back, as nearly as possible, into the financial position they held before the loss, and no better off.

The traditional common law duty on both parties to an insurance contract to deal honestly and reveal what is relevant. For business policyholders it has largely been replaced by the statutory duty of fair presentation.

The duty under the Insurance Act 2015 for a business policyholder, before cover starts, to disclose material circumstances and give the information in a way that is reasonably clear and accessible to a prudent insurer.

A fact that would influence a prudent insurer's decision on whether to accept a risk, what terms to apply, or what premium to charge.

Failing to tell the insurer about a relevant fact when arranging cover. The remedy depends on whether the failure was deliberate, reckless or innocent and on what the insurer would have done had it known.

A promise by the insured set out in the policy, such as keeping certain security in place. Breach suspends cover while it continues and may leave the insurer liable only for losses unrelated to the breach.

The dominant and effective cause of a loss, or the cause most closely connected with it. It determines whether an insured peril or an exclusion applies to the claim.

The insurer's right, once it has paid a claim, to stand in the insured's shoes and pursue recovery of the loss from the party responsible for causing it.

The right of an insurer that has paid a claim to recover a fair share from other insurers covering the same loss, so that the cost is shared between them.

A reduction applied to a claim where the sum insured is lower than the value at risk, so that the insured bears part of the loss in the same proportion.

The first amount of any loss that the insured must bear themselves before the insurer makes any payment.

A claims settlement basis under which the insurer repairs or rebuilds damaged property, or pays the cost of doing so, rather than paying its market value in cash.

The UK regulator responsible for conduct in financial services, including fair treatment of customers and market integrity. It writes and enforces the rules that insurers and intermediaries must follow.

The UK regulator, part of the Bank of England, that supervises the financial soundness of insurers and banks, checking that they hold sufficient capital and are run safely.

The UK arrangement under which insurers are supervised by the PRA for prudential soundness and by the FCA for conduct, while intermediaries are regulated by the FCA alone.

An FCA rule requiring firms to act so as to deliver good outcomes for retail customers, focused on products and services, price and value, consumer understanding and consumer support.

An FCA principle requiring firms to pay due regard to customers' interests and treat them fairly, covering product design, information, advice, claims handling and after-sales service.

A framework requiring senior people in financial firms to be approved with clearly allocated responsibilities, and requiring firms to certify that staff in key roles remain fit and proper.

An independent UK scheme that resolves complaints between consumers and financial firms, including insurers, free of charge to the consumer. Its decisions can bind the firm.

A statutory fund of last resort that pays compensation to eligible customers of failed financial firms, including insurance policyholders, up to set limits.

A European directive implemented in the UK that sets standards for firms selling insurance, covering areas such as staff knowledge, commission disclosure and product oversight.

Money an intermediary holds for a customer, such as premium collected before it reaches the insurer. It must normally be kept separate from the firm's own funds.

Situations where a firm's or individual's own interests, or those of another customer, could improperly influence the advice or service given. Firms must identify and manage them.

The process of making the proceeds of crime appear to come from a legitimate source. Insurers must operate controls to detect it and staff must report suspicions to the authorities.

Ongoing learning that keeps an individual's knowledge and skills up to date throughout their career, usually with a set number of hours recorded each year.

A set of ethical principles published by the Chartered Insurance Institute that members must follow, covering integrity, competence, customer focus and accountability.