CII IF3 cheat sheet

Utmost good faith (uberrimae fidei) is a mutual duty; the insured must disclose material facts and the insurer must not misrepresent terms.

A material fact is one that would influence a prudent insurer's decision on acceptance, premium, or terms; the test is objective.

Insurable interest: the insured must benefit from the preservation of the subject-matter or suffer loss on its destruction; required at inception for indemnity policies.

Indemnity principle: the insured is restored to the pre-loss financial position, no better and no worse; valued policies are an exception.

Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and pursue third parties; it cannot exceed the amount paid.

Contribution applies where multiple policies cover the same loss; insurers share proportionately, often using the independent liability method.

Proximate cause is the dominant, effective cause of loss; it determines whether the loss falls within the policy perils.

The Insurance Act 2015 reformed disclosure: the insured must make a fair presentation of risk, and remedies for breach are proportionate to culpability.

Regulation of insurance business is split: the PRA prudential regulation and the FCA conduct regulation; dual-regulated firms deal with both.

A proposal form is an offer to contract; acceptance occurs when the insurer issues the policy or cover note.

The duty of fair presentation under the Insurance Act 2015 requires disclosure of all material circumstances and not misleading the insurer.

Policy terms include conditions, warranties, and exclusions; a warranty is a promise that must be complied with exactly.

Breach of warranty suspends cover for the period of breach; the insurer may avoid liability for losses during that period.

Claims conditions require prompt notification, proof of loss, and cooperation; breach may allow the insurer to deny liability if prejudiced.

Utmost good faith continues during the contract; fraudulent claims may be refused in full under the Insurance Act 2015.

The contra proferentem rule construes ambiguous policy wording against the drafter, usually the insurer.

A condition precedent must be satisfied before the insurer's liability arises; a condition subsequent may terminate liability.

The FCA's statutory objectives are consumer protection, integrity, and competition; it regulates conduct for retail and wholesale markets.

The PRA's objectives are safety and soundness of insurers and policyholder protection; it sets capital and governance standards.

Treating Customers Fairly (TCF) is embedded in the FCA's principles; firms must demonstrate fair outcomes across the product lifecycle.

The Consumer Duty (2023) requires firms to act to deliver good outcomes for retail customers, with a higher standard of care.

The FCA's Principles for Businesses include integrity, skill and care, and communication of information in a clear, fair, and not misleading way.

The Senior Managers and Certification Regime (SMCR) assigns clear responsibilities to senior individuals and requires fitness and propriety.

Financial Ombudsman Service (FOS) resolves disputes between firms and consumers; awards are binding on the firm if accepted by the consumer.

The Financial Services Compensation Scheme (FSCS) protects policyholders up to specified limits if an insurer fails.

An agent acts on behalf of a principal; an insurance broker typically acts as agent of the insured, not the insurer.

Agency authority may be actual (express or implied) or apparent; apparent authority binds the principal if a third party reasonably relies.

Brokers owe duties of care, skill, and disclosure to clients; they must place cover with suitable insurers and explain material terms.

Under the Insurance Distribution Directive (IDD), intermediaries must disclose their status, remuneration, and conflicts of interest.

Market practice: placing and claims are often handled through Lloyd's brokers and managing agents; binding authority is delegated.

Commission disclosure is required where the intermediary's remuneration may influence advice; transparency supports fair treatment.

Errors and omissions (E&O) insurance protects intermediaries against claims arising from professional negligence.

The broker's duty to place cover includes checking the policy meets the client's needs and communicating material facts to insurers.