CII IF4 flashcards

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

Claim notification

The policyholder or broker tells the insurer that a loss has occurred, giving the date, cause and circumstances so the insurer can open a claim reference and begin investigation.

Conditions precedent to liability

Policy terms the insured must satisfy before the insurer is liable to pay, such as submitting a proof of loss or not admitting liability to a third party.

Indemnity principle

The insured is restored to the financial position held immediately before the loss, no better and no worse, so settlement is based on actual loss rather than the sum insured.

Sum insured

The maximum amount the insurer will pay under a policy or section, before applying any deductible, average or sub-limit stated in the wording.

Average clause

Where the sum insured is less than the value at risk, the claim is reduced proportionately: payment equals loss multiplied by sum insured divided by value at risk.

Deductible or excess

The first amount of each loss that the insured bears; it is deducted from the loss before applying average or limits and is fixed in the schedule.

Salvage

Damaged property or its proceeds retained by the insurer after settlement; its value offsets the claim so the insured does not recover twice for the same loss.

Betterment

An improvement in the insured's position from repair or replacement with new property; the insurer may reduce the payment by the extent of the improvement.

Subrogation

After paying a claim, the insurer takes over the insured's legal rights of recovery against the third party responsible, provided the insured has not prejudiced those rights.

Contribution between insurers

Where two or more policies cover the same interest, peril and loss, each insurer shares the payment, commonly by independent liability or by proportion of sums insured.

Reservation of rights

A written statement that the insurer is investigating or defending a claim without confirming cover, preserving its right to decline later on grounds such as breach of condition.

Without prejudice

A label for settlement negotiations that cannot be shown to the court as an admission of liability if negotiations fail and the dispute proceeds to trial.

Ex gratia payment

A discretionary payment made where the insurer is not legally liable, usually to preserve a commercial relationship; it does not set a precedent for future claims.

Fraudulent claim

A claim containing a deliberately false statement or exaggeration; the insurer may reject it entirely and may avoid the policy, recovering payments already made.

Proof of loss

A formal, usually sworn, statement of the amount and circumstances of the loss that the insured must submit within the period required by the policy.

Loss adjuster

An independent specialist appointed by the insurer to investigate large or complex claims, verify the cause and amount, and recommend a settlement figure.

Loss assessor

A professional engaged by the policyholder, not the insurer, to prepare and negotiate the claim; their fees are usually borne by the insured.

Third-party liability claim

A claim by an injured person or damaged party against the insured; the insurer indemnifies the insured and normally controls the defence of the proceedings.

Claim reserve

An estimate of the expected ultimate cost of a reported claim, held as a liability in the insurer's accounts and revised as the claim develops.

Incurred but not reported

IBNR is the reserve for losses that have occurred but have not yet been notified to the insurer, estimated statistically from historical reporting patterns.

Salvage and recovery income

Money received from selling damaged property or from subrogated recoveries, which reduces the net cost of claims in the insurer's accounts.

Reinstatement cover

Cover that restores the sum insured after a loss, either for a stated number of claims or in full, usually in return for an additional premium.

Proximate cause

The dominant, effective cause of a loss, as opposed to a remote cause; cover depends on whether that proximate cause is an insured peril.

Utmost good faith

The mutual duty of insurer and insured to deal fairly and disclose material facts; the Consumer Insurance Act 2012 and Insurance Act 2015 govern remedies for breach.

Financial Ombudsman Service

The UK dispute-resolution body for eligible complaints against insurers; it can award compensation up to its published limit and its decisions bind the firm.

Limitation period

The time within which a claim must be brought in court, generally six years for contract in England and Wales, after which the claim is statute-barred.

Claim settlement options

Insurers may settle by cash payment, repair or reinstatement, or replacement; the policy wording determines which options are available for the loss.

Total loss versus partial loss

A total loss means the property is destroyed or uneconomic to repair, so the full insured value is paid; a partial loss is repaired or paid on the damage.

Sue and labour clause

A clause requiring the insured to take reasonable steps to minimise or avert loss, with the insurer reimbursing those reasonable costs in addition to the claim.

Mitigation of loss

The insured's duty to take reasonable steps to limit further damage after a loss; failure may reduce the amount payable for the avoidable part.

Claim leakage

Payments above the true amount due, caused by overpayment, missed deductibles, duplicate payments or poor reserving; a key claims-handling performance measure.

Cycle time

The elapsed period from notification to settlement of a claim, used as an operational measure of claims-handling efficiency and customer service.