CII Basic Insurance flashcards

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

Insurable interest

A legal or financial relationship such that the policyholder benefits from the continued existence of the insured subject and suffers loss if it is damaged or destroyed.

Utmost good faith

The principle that both parties to an insurance contract must deal openly and disclose material facts; for consumers the duty is to take reasonable care not to misrepresent.

Indemnity

The principle that the insured is restored to the same financial position as before the loss, no better and no worse; it does not apply to life or personal accident cover.

Subrogation

The insurer's right, after paying a claim, to step into the insured's shoes and recover the loss from the third party responsible, supporting the principle of indemnity.

Contribution

The right of an insurer that has paid a claim to recover a rateable share from other insurers covering the same risk and interest, so the insured does not recover twice.

Proximate cause

The dominant and effective cause of a loss, as opposed to the last event; if an excluded peril is the proximate cause, the claim is not payable.

Average clause

A condition reducing a claim in proportion to underinsurance; payment equals the loss multiplied by the sum insured divided by the value at risk.

Insurable risk

A risk that is accidental, definable, measurable and numerous enough to pool, and whose premium is affordable; speculative risks such as trading losses are not insurable.

Motor third-party cover

The legal minimum motor insurance in the UK, covering injury or damage the policyholder causes to other people and their property; comprehensive cover adds own damage.

Term assurance

Life cover that pays a lump sum only if death occurs within a specified term; it has no investment or surrender value and is usually the cheapest form of life cover.

Whole-of-life assurance

Life cover that pays on death whenever it occurs, provided premiums are maintained; it often builds a surrender value and may include an investment element.

Income protection insurance

Cover that replaces part of earnings, typically 50–70% of gross income, after a deferred period while the insured is unable to work through illness or injury.

Critical illness cover

A policy paying a tax-free lump sum when the insured is diagnosed with a listed condition that meets the policy definition; it pays once, not as a recurring income.

Employers' liability insurance

Compulsory cover for most UK employers against claims from employees for work-related injury or disease; it is separate from public liability cover for third parties.

Professional indemnity insurance

Cover for claims arising from negligent advice or professional services; it is usually written on a claims-made basis, so the policy in force at notification responds.

Business interruption cover

Cover for loss of gross profit or increased cost of working following an insured peril at the premises, usually payable over an indemnity period of 12 to 36 months.

Buildings versus contents cover

Buildings cover insures the structure and fixtures, often on a sum insured basis; contents cover insures movable items, with high-value items often listed separately.

Insurance Act 2015

UK statute governing commercial insurance disclosure and remedies; it replaced the duty to volunteer information with a duty of fair presentation and changed breach of warranty rules.

Consumer Insurance Act 2012

UK statute replacing the consumer's duty to volunteer information with a duty to take reasonable care not to make a misrepresentation, with proportionate remedies for breach.

Warranty in insurance

A promise in the policy that must be exactly complied with; under the Insurance Act 2015 breach suspends cover rather than automatically discharging the insurer, and can be remedied.

Policy avoidance

A remedy treating the contract as never having existed, typically for fraudulent misrepresentation or non-disclosure; premiums may be retained and claims need not be paid.

FCA and PRA

The UK regulators created by the Financial Services and Markets Act 2000; the FCA regulates conduct and the PRA prudential soundness of insurers and banks.

Consumer Duty

An FCA rule requiring firms to act to deliver good outcomes for retail customers across products, price and value, consumer understanding and consumer support.

Financial Ombudsman Service

A free UK dispute-resolution service for consumers; its decisions bind the firm but not the consumer, who may still pursue the matter in court.

Financial Services Compensation Scheme

The UK safety net if an authorised insurer fails; it covers compulsory insurance claims in full and 90% of most other general insurance claims, subject to rules.

Money laundering reporting

Under the Proceeds of Crime Act 2002, firms must apply customer due diligence, monitor transactions and report suspicious activity to the National Crime Agency.

Insurance broker

An intermediary who acts as agent of the client rather than the insurer, owes a duty of care to the client, and typically places cover with a range of insurers.

Lloyd's of London

A subscription market where syndicates accept shares of a risk; each syndicate is liable only for its own share, backed by the Lloyd's central fund.

Facultative reinsurance

Reinsurance of a single risk, offered and accepted separately by the reinsurer; it differs from treaty reinsurance, which covers a whole portfolio automatically.

Quota share treaty

A reinsurance treaty in which the reinsurer accepts a fixed percentage of every risk in a defined portfolio, and receives the same percentage of premiums and pays the same share of claims.

Loss adjuster versus loss assessor

A loss adjuster investigates and settles claims on behalf of the insurer; a loss assessor is engaged by the policyholder to prepare and negotiate the claim.

Complaint final response

Under FCA rules a firm must acknowledge a complaint promptly and provide a final response within eight weeks; otherwise the customer may refer it to the Ombudsman.