CII IF7 cheat sheet

Claim notification duties: the insured must notify the insurer within a reasonable time; late notification only defeats a claim where it causes prejudice to the insurer, unless a condition precedent or contractual time limit applies.

Insurer's response timetable (England & Wales, FCA rules): acknowledge a claim promptly, decide within 8 weeks of receiving sufficient evidence, and pay within 5 business days of settlement; failure allows referral to the Financial Ombudsman Service.

Indemnity principle: the insured is restored to the pre-loss financial position, no better and no worse; new-for-old replacement is limited to the sum insured and any policy extension.

Insurable interest must exist at the time of loss for indemnity policies (Life Assurance Act 1774 requires it at inception for life policies).

Utmost good faith: the Consumer Insurance (Disclosure and Representations) Act 2012 requires consumers to take reasonable care to answer questions honestly and accurately; the Insurance Act 2015 applies the duty of fair presentation to commercial insureds.

Proportionate remedy (Insurance Act 2015, non-consumer): deliberate or reckless breach allows the insurer to avoid and retain premiums; careless breach permits a proportionate reduction reflecting what the insurer would have done with fair presentation.

Terms in commercial policies are classified under the Insurance Act 2015 as basis terms, suspensive conditions or other terms; only breach of a term defining the risk as a whole allows the insurer to treat the contract as terminated.

Fraudulent claims: under common law a fraudulent claim forfeits the whole claim, and under the Insurance Act 2015 the insurer may also recover sums already paid and terminate the contract.

Claims handling is regulated conduct: the FCA Handbook (ICOBS 8) requires fair, prompt and transparent settlement, and the Insurance: Conduct of Business rules bind insurers and intermediaries alike.

Loss adjusters investigate larger or complex claims; loss assessors act for the insured. Adjuster fees are normally borne by the insurer and do not reduce the indemnity.

Burden of proof: the insured must show a loss occurred within the policy period from an insured peril; the insurer must prove an exclusion or limitation applies.

Average (underinsurance) clause: settlement = loss x (sum insured / value at risk), applied where the sum insured is less than the full value of the property at risk.

Salvage and subrogation: the insurer paying a total loss may take over salvage rights, and after indemnifying the insured acquires subrogation rights against the third party liable (limited to the amount paid).

Contribution between insurers: where two or more policies cover the same interest, same peril and same insured, liability is shared, commonly rateably by independent liability.

Reinstatement (new-for-old) cover requires the sum insured to represent full reinstatement cost; the insurer may reduce the claim if the sum insured is inadequate at the date of loss.

Business interruption settlement: gross profit basis = loss of turnover less saved uninsured working expenses, subject to the maximum indemnity period and any rate of gross profit assumption.

Claims reserve and reserving: case reserves are set for known claims; IBNR (incurred but not reported) reserves cover claims incurred but not yet notified, and both feed the insurer's technical provisions.

Third-party claims (liability): the insurer's duty is to indemnify the insured against legal liability, and the Third Parties (Rights against Insurers) Act 2010 allows a claimant to proceed directly against the insurer where the insured is insolvent.