CII IF8 flashcards

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

Utmost good faith

A reciprocal duty requiring the proposer to disclose all material facts and the insurer to act fairly, including clear policy terms and prompt claims handling. Breach by the proposer may allow avoidance or a proportionate remedy.

Material fact

Any circumstance that would influence a prudent underwriter's decision on whether to accept the risk, the terms imposed, or the premium charged. The test is objective, not the proposer's personal view.

Insurable interest

A financial or legal relationship to the subject matter such that the insured benefits from its preservation and suffers loss from its damage. It must exist at inception for indemnity cover and for life policies.

Indemnity principle

The insured is restored to the financial position held immediately before the loss, no better and no worse. Valued policies and new-for-old cover are limited exceptions to this principle.

Subrogation

After paying a claim, the insurer acquires the insured's rights to recover from the party responsible for the loss. It prevents double recovery and cannot be excluded by prior agreement.

Proportionate remedy

Under the Insurance Act 2015, where a breach of fair presentation is neither deliberate nor reckless, the insurer may reduce the claim proportionately rather than avoid the contract entirely.

Avoidance of contract

The contract is treated as never having existed, so all claims are refused and premium may be retained. It applies to deliberate or reckless misrepresentation and to fraudulent claims.

Financial Ombudsman Service

An independent dispute resolution scheme for complaints about regulated financial firms. Consumers may refer unresolved complaints after the firm's final response, typically within eight weeks.

Prompt notification

Policies impose a duty to notify claims promptly. Late notification only prejudices the insurer where it causes actual prejudice, following the Insurance Act 2015 reforms.

Average clause

Where the sum insured is less than the value at risk, claims are reduced in proportion: settlement equals loss multiplied by sum insured divided by value at risk.

Betterment

The improvement in the insured's position when new items replace old ones. Insurers may deduct an amount reflecting the improvement so the insured does not profit from the claim.

Salvage

Damaged property that retains residual value after a total loss. The insurer may sell it and offset the proceeds against the claim, or allow the insured to retain it at an agreed deduction.

Fraudulent claim

A claim made dishonestly, for example by exaggeration or fabrication. The insurer may reject the entire claim, avoid the policy from the fraudulent act, and recover earlier payments.

Third-party liability claim

A claim by a person injured or whose property is damaged by the insured. The insurer investigates negligence, causation, and quantum, then may settle or defend the action.

Final response letter

The firm's written outcome to a complaint, setting out its decision and the complainant's right to refer the matter to the Financial Ombudsman Service within the stated period.

Excess

The first amount of each claim the insured bears. It reduces small claims and moral hazard, and may be compulsory by law or voluntarily accepted in return for a lower premium.

Motor third-party cover

Compulsory cover under the Road Traffic Act 1988 for bodily injury and property damage caused to third parties. Driving without it is a criminal offence.

Employers' liability insurance

Compulsory cover for employers in Great Britain against liability for employee injury or disease arising from work. The statutory minimum limit is five million pounds.

Public liability insurance

Cover for legal liability to third parties for injury or property damage arising from the insured's business activities. It does not cover employee injury, which is employers' liability.

Products liability insurance

Cover for liability arising from goods supplied, sold, or repaired by the insured that cause injury or damage. It addresses defective products and failure to warn.

Business interruption cover

Indemnifies lost gross profit and increased working costs following an insured peril at the premises. The indemnity period and sum insured must reflect realistic recovery time.

Personal accident policy

Pays fixed benefits for accidental death, permanent disablement, or medical expenses regardless of fault. Benefits are agreed sums, not indemnity for actual loss.

Term assurance

Life cover for a fixed period with no investment element. It pays the sum assured only if death occurs within the term, and has no surrender value.

Travel insurance

A package covering medical expenses, cancellation, baggage, and personal liability during travel. Pre-existing medical conditions must be declared and may be excluded or loaded.

Moral hazard

The risk that the proposer's honesty, attitude, or financial circumstances increase the likelihood of a claim. It is assessed through questions on claims history, convictions, and occupation.

Physical hazard

A tangible feature of the risk that affects the likelihood or severity of loss, such as construction, occupancy, fire protection, security, or location. It is rated directly.

Proposal form

The primary document recording risk information supplied by the proposer. Its answers form the basis of the contract and incomplete or inaccurate answers may affect cover.

Reinsurance

Insurance purchased by an insurer to transfer part of its risk. Quota share and surplus treaties share premiums and claims, while excess of loss covers catastrophic losses above a threshold.

Warranty

A policy condition that must be complied with exactly. Breach suspends cover until the warranty is remedied, although the Insurance Act 2015 limits this for non-consumer contracts.

Declinature

The underwriter's refusal to accept a risk. It must be communicated clearly and recorded, and the proposer should be told of any alternative terms available.

Risk improvement

A recommendation such as installing alarms, sprinklers, or security that reduces hazard. Compliance may lower premium or excess, while non-compliance may void cover.

Accumulation control

Managing exposure to a single event or location so that total potential losses remain within capacity. It uses reinsurance, line limits, and portfolio diversification across classes.