CII IF3 key terms

The common law duty on both parties to an insurance contract to deal openly and fairly with each other, historically requiring disclosure of material facts and prohibiting misrepresentation. The duty was reformed for consumers by the Consumer Insurance (Disclosure and Representations) Act 2012 and for non-consumer risks by the Insurance Act 2015.

A legal requirement that the person taking out the insurance stands to suffer financial or other recognised loss if the insured event occurs. Without it the contract is generally void, though the Life Assurance Act 1774 and related statutes define the position for life and marine cover.

The rule that most general insurance restores the insured to the financial position held before the loss, no better and no worse. It underpins limits of liability, average clauses and subrogation, and is displaced by agreed-value or valued policies.

The insurer's right, after paying a claim, to stand in the insured's shoes and pursue third parties who caused the loss, or to recover from the insured any later compensation received. It supports the indemnity principle and is usually excluded for life and personal accident cover.

The principle allowing an insurer that has paid a loss to recover a proportionate share from other insurers covering the same interest, peril and period. It prevents the insured from recovering more than the loss and applies only to indemnity policies.

The dominant, effective cause of a loss, as opposed to the last event in time. Insurers use it to decide whether a peril is covered, particularly where several causes combine or where an excluded peril follows an insured one.

A fact that would influence a prudent insurer's decision on whether to accept the risk, what terms to impose, or what premium to charge. Consumers need only take reasonable care to answer questions fully and accurately, while commercial insureds must disclose such facts under the duty of fair presentation.

The Insurance Act 2015 obligation on a commercial insured to disclose every material circumstance it knows or ought to know, and to present the risk clearly and accessibly. Breach gives the insurer proportionate remedies rather than automatic avoidance.

A false or misleading statement of fact made by a proposer. Where it is careless or deliberate the insurer may have remedies, ranging from proportionate adjustment of the claim under the 2012 and 2015 Acts to avoidance for deliberate or reckless breaches.

The scheme under the Consumer Insurance (Disclosure) and Representations Act 2012 and Insurance Act 2015 by which an insurer responds to a qualifying breach according to what it would have done had the truth been told. Options include treating the contract as if different terms applied, reducing the claim, or avoiding the policy.

The remedy that treats an insurance contract as never having existed, so the insurer returns the premium and owes nothing. Since 2012 and 2015 it is generally reserved for deliberate or reckless breaches by consumers and is a last-resort proportionate remedy for commercial insureds.

A policy term that the insured promises to satisfy, historically suspending cover entirely on breach regardless of causation. The Insurance Act 2015 replaced automatic discharge with suspension of cover for the period of breach, unless the term is specifically designed to reduce a particular risk.

A term that must be fulfilled before the insurer's liability arises or before a claim can be enforced, such as notifying a claim within a stated time. Breach can defeat the claim, so clear drafting and fair treatment of the customer matter.

A term that removes specified perils, property, persons or circumstances from cover. It is interpreted contra proferentem where ambiguous, and under the Insurance Act 2015 an insurer cannot rely on a breach of a term that is irrelevant to the loss.

A declaration that the answers in the proposal are the basis of the contract, converting them into warranties. The Financial Conduct Authority banned such clauses for retail consumers from 2017, so they survive only in limited commercial contexts.

A condition applying to under-insured property risks that reduces a claim in the same proportion as the sum insured bears to the value at risk. It protects the indemnity principle and is typically found in commercial property and certain marine policies.

A policy term requiring the insured to tell the insurer about a claim or circumstance within a stated period and to cooperate in its investigation. Late notification may prejudice cover, subject to the insurer showing it has suffered prejudice.

The UK regulator responsible for conduct of business, market integrity and consumer protection across general and life insurance. It sets rules in the FCA Handbook, including the Principles for Businesses and the Insurance: Conduct of Business sourcebook.

The Bank of England regulator that supervises the financial soundness of insurers, including capital, solvency and governance, and works alongside the Financial Conduct Authority under the twin peaks model.

The long-standing FCA principle that firms must deliver fair outcomes across the product lifecycle, from design and promotion to claims and complaints. It is embedded in the six TCF outcomes and now reinforced by the Consumer Duty.

The FCA rule requiring firms to act to deliver good outcomes for retail customers in four areas: products and services, price and value, consumer understanding, and consumer support. It applies to insurers and intermediaries and is supported by cross-cutting obligations of good faith and avoidance of foreseeable harm.

The framework of rules requiring insurers and distributors to design, approve, monitor and review products so they meet the needs of an identified target market. It covers product approval processes and the distribution chain.

The EU directive implemented in the UK through the FCA Handbook, imposing requirements on insurers and intermediaries such as professional knowledge, conflicts of interest management, product oversight and disclosure of remuneration and status.

The risk-based prudential regime for UK insurers covering capital requirements, governance, risk management and reporting. Its UK form continues through PRA rules, with reforms intended to release capital for productive investment while preserving policyholder protection.

An intermediary who acts as agent of the client rather than the insurer, advising on risk and placing cover with selected insurers. Brokers owe duties of care and skill, must disclose their status and remuneration, and are regulated by the Financial Conduct Authority.

A person appointed to act on behalf of another, whose acts can bind the principal within the authority given. In insurance, an agent may act for the insurer, the insured or both, and the identity of the principal affects disclosure and liability.

The scope of an agent's power to bind a principal, whether express, implied by the role, or apparent to a third party who reasonably relies on it. Apparent authority can bind an insurer even where internal limits were breached.

The requirement that an intermediary tells the customer whether it acts for the insurer or the customer, and explains the basis of its remuneration. It supports informed choice and helps manage conflicts of interest.

The established conventions of the London and UK insurance markets, such as placing slips, binding authorities, coinsurance and claims handling through market bodies. Understanding these conventions helps candidates interpret policy wording and intermediary roles.

A legally binding agreement in which one party, in return for a premium, promises to indemnify or pay a sum on the occurrence of an uncertain event affecting another party's interest. It is governed by general contract law and specific insurance statutes.

The document, now often an online questionnaire, on which a proposer supplies information for underwriting. Its questions shape the duty of disclosure, so their meaning and clarity matter in later disputes about misrepresentation.

The maximum amount an insurer will pay under a policy, whether set by the insured for property cover or agreed as a limit of liability. It determines premium and, where the risk is under-insured, may trigger average.

The specific event or cause of loss that a policy covers, such as fire, theft, flood or accident. Identifying the operative peril, and its proximate cause, is central to deciding whether a claim falls within cover.

The independent statutory dispute-resolution body for retail customers and small businesses. It can award compensation and decide complaints on the basis of what is fair and reasonable, and its decisions are binding on the firm if accepted by the complainant.

The rules governing contracts sold without face-to-face contact, including cancellation rights for retail consumers. They affect how intermediaries must disclose information before a sale and handle cooling-off periods.