CII IF7 flashcards

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

Indemnity principle

The insured is restored to the financial position held immediately before the loss, no better and no worse. It limits recovery to the actual loss, subject to the sum insured.

Insurable interest

A legal or financial relationship with the subject matter such that the insured benefits from its preservation or suffers loss from its damage. Required at inception for life policies.

Utmost good faith

The mutual duty of disclosure between insurer and insured. For consumers, the Consumer Insurance (Disclosure and Representations) Act 2012 replaced the old duty with a duty to take reasonable care.

Fair presentation

The Insurance Act 2015 duty on commercial insureds to disclose every material circumstance and do so in a clear and accessible manner, without misrepresentation.

Proportionate remedy

Where a commercial insured breaches the duty of fair presentation carelessly, the insurer may reduce the claim proportionately to reflect what it would have done had the risk been fairly presented.

Deliberate or reckless breach

A breach of the duty of fair presentation that is deliberate or reckless allows the insurer to avoid the contract and retain premiums, subject to statutory notice requirements.

Basis term

A term in a commercial policy that the insured must comply with; breach allows the insurer to avoid the contract if the breach is relevant to the loss.

Suspensive condition

A policy term whose breach suspends the insurer's liability for losses occurring while the breach continues, rather than allowing the insurer to avoid the whole contract.

Fraudulent claim

A claim made dishonestly, for example by exaggeration or fabrication. It forfeits the entire claim and, under the Insurance Act 2015, allows recovery of sums already paid.

Notification clause

A policy condition requiring the insured to notify the insurer of a claim or circumstance within a stated period; breach may prejudice cover depending on its wording.

Condition precedent

A policy term that must be satisfied before the insurer's liability arises. Failure to comply can entitle the insurer to decline the claim entirely.

Loss adjuster

An independent specialist appointed by the insurer to investigate the cause and value of larger or complex claims and to recommend settlement.

Loss assessor

A specialist engaged by and acting for the insured to prepare and negotiate a claim. Fees are normally met by the insured, not deducted from the indemnity.

Burden of proof

The insured must establish that a loss occurred within the policy period from an insured peril; the insurer must prove that an exclusion or limitation applies.

Average clause

A condition applying where the sum insured is less than the value at risk. The claim is reduced proportionately: loss multiplied by sum insured divided by value at risk.

Underinsurance

Where the sum insured is below the full value or reinstatement cost of the property, resulting in a reduced settlement under average or a proportionate reduction.

Salvage

Remaining property after a loss. Where the insurer pays a total loss it may take over salvage rights and realise their value to reduce the net cost of the claim.

Subrogation

The insurer's right, after indemnifying the insured, to pursue recovery from a third party liable for the loss. Recovery is limited to the amount paid.

Contribution

The right of an insurer to share the cost of a claim with other insurers covering the same interest, peril and insured, often rateably by independent liability.

Reinstatement cover

A policy basis replacing damaged property with new equivalent property rather than paying its depreciated value, subject to the sum insured representing full reinstatement cost.

Business interruption claim

A claim for lost gross profit following interruption of the business, calculated as reduced turnover less saved insured working expenses, within the maximum indemnity period.

Maximum indemnity period

The maximum period after a loss during which business interruption losses are payable, chosen by the insured to reflect the expected time to restore normal trading.

IBNR reserves

Incurred but not reported reserves set aside for claims that have occurred but have not yet been notified to the insurer at the valuation date.

Case reserve

An individual estimate set by the claims handler for a known reported claim, reflecting expected settlement costs and revised as the claim develops.

Third-party liability claim

A claim by a person injured or whose property is damaged against the insured; the insurer indemnifies the insured against legal liability under the policy.

Third Parties (Rights against Insurers) Act 2010

Legislation allowing a claimant to bring proceedings directly against an insurer where the insured is insolvent, transferring the insured's rights under the policy.

Financial Ombudsman Service

The statutory dispute resolution scheme for UK financial services. Consumers may refer unresolved complaints, including claims disputes, for an independent decision.

ICOBS 8

The FCA Handbook rules on claims handling requiring insurers to handle claims promptly and fairly, provide information and settle claims transparently.

Acknowledge claim promptly

The insurer's duty to confirm receipt of a claim without undue delay, providing information on how the claim will be handled and what evidence is required.

Eight-week decision rule

Under FCA rules, an insurer should decide whether to accept a claim within eight weeks of receiving sufficient evidence, failing which the consumer may refer to the Ombudsman.

Five-day settlement

The FCA expectation that once a claim is agreed, the insurer pays the settlement within five business days, or explains the delay to the insured.

Exclusion clause

A policy term removing specified perils, causes or circumstances from cover. The insurer bears the burden of proving that an exclusion applies to the loss.

Proximate cause

The dominant, effective or operative cause of a loss. It determines whether an insured peril or an excluded peril applies where multiple causes are present.