CII IF5 flashcards

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

Utmost good faith

A mutual duty of the utmost good faith between insurer and insured, historically requiring full disclosure of material facts; codified for non-consumer contracts by the Insurance Act 2015.

Material circumstance

Under the Insurance Act 2015, a circumstance that would influence a prudent insurer's judgment on whether to take the risk and on what terms.

Insurable interest

A financial or legal interest in the subject matter of insurance such that the insured benefits from its preservation or suffers loss from its damage.

Indemnity principle

The principle that the insured is restored to its pre-loss financial position, neither better nor worse off, subject to policy limits and exceptions.

Subrogation

The insurer's right, after paying a claim, to step into the insured's shoes and pursue recovery from third parties responsible for the loss.

Contribution

The right of an insurer that has paid a loss to recover a proportionate share from other insurers covering the same interest, peril and period.

Proximate cause

The dominant and effective cause of a loss, determined by applying the policy wording to the facts; exclusions are construed narrowly against the insurer.

Double insurance

Arises where more than one policy covers the same interest against the same peril for the same period, allowing contribution between insurers.

Offer and acceptance

The formation of a contract requires a clear offer and unqualified acceptance, supported by consideration and an intention to create legal relations.

Warranty

A policy term that, if breached, suspends the insurer's liability during the breach under the Insurance Act 2015, rather than automatically discharging the insurer.

Condition precedent

A policy term that must be satisfied before the insurer's liability to pay a claim arises; failure may entitle the insurer to reject the claim.

Fair presentation

The insured's duty under the Insurance Act 2015 to disclose material circumstances and not make misrepresentations, in a manner reasonably clear and accessible.

Proportionate remedy

The Insurance Act 2015 remedy for non-deliberate breach of the duty of fair presentation, allowing the insurer to reduce the claim proportionately.

Consumer Insurance Act 2012

Replaced the consumer duty of disclosure with a duty to take reasonable care not to make a misrepresentation, with remedies based on the nature of the breach.

Transparency requirement

Under the Insurance Act 2015, an insurer cannot rely on a disadvantageous term unless it has taken sufficient steps to draw it to the insured's attention.

Third Parties (Rights Against Insurers) Act 2010

Allows a third party to claim directly against an insurer where the insured is insolvent, once the insured's liability has been established.

FSMA 2000

The Financial Services and Markets Act 2000 establishes the regulatory framework, the FCA and PRA, and their statutory objectives.

FCA objectives

The FCA's statutory objectives are consumer protection, integrity of the financial system and promoting effective competition in the interests of consumers.

PRA objectives

The PRA's objectives are general safety and soundness and, for insurers, the protection of policyholders.

SM&CR

The Senior Managers and Certification Regime imposes prescribed responsibilities, a duty of responsibility and fitness and propriety requirements on senior managers and certified staff.

IDD

The Insurance Distribution Directive, implemented in the UK through ICOBS and the IDD Regulations 2018, governs conduct, product oversight and conflicts of interest.

Consumer Duty

An FCA rule (PRIN 2A) requiring firms to act to deliver good outcomes for retail customers across products, price, understanding and support.

FOS award limit

The maximum compensation the Financial Ombudsman Service can award, set at £430,000 for complaints referred on or after 1 April 2024.

FSCS protection

The Financial Services Compensation Scheme protects policyholders of failed insurers, generally 100% for compulsory insurance and 90% for other general insurance claims.

Appointed representative

An intermediary that acts on behalf of an authorised principal under a contractual arrangement, rather than being directly authorised by the FCA.

Claims notification

The insured's duty to notify a claim promptly under the policy; late notification may be a breach of condition, but the insurer must show prejudice.

Burden of proof

The insured must prove the loss falls within the cover, while the insurer must prove that an exclusion applies to the loss.

Fraudulent claim

A claim made dishonestly; under the Insurance Act 2015 the insurer may refuse it, recover sums paid and treat the whole contract as terminated.

FOS jurisdiction

The Financial Ombudsman Service handles complaints from eligible complainants about regulated firms, deciding on what is fair and reasonable.

Limitation period

The period within which a claim must be brought; generally six years for contract claims and twelve years for deeds under the Limitation Act 1980.

Arbitration

A form of alternative dispute resolution in which an independent arbitrator decides the dispute; awards are final and enforceable under the Arbitration Act 1996.

Complaint time limit

Firms must acknowledge complaints promptly and resolve them within eight weeks; otherwise the complainant may refer the matter to FOS within six months.