CIIG Diploma cheat sheet

Insurable interest requires a financial relationship such that the insured benefits from preservation of the subject matter and suffers loss from its destruction; it must exist at inception for life assurance and at the time of loss for indemnity covers.

Utmost good faith (uberrimae fidei) obliges disclosure of all material facts a prudent underwriter would consider relevant; materiality is judged by the effect on premium or acceptance decision, not by the insured's view of importance.

Indemnity restores the insured to the pre-loss financial position, subject to sum insured, policy limits, excess and average; new-for-old replacement is an exception granted by policy wording, not a principle.

Proximate cause is the dominant, effective cause of loss linking it to an insured peril; concurrent causes are resolved by the courts on the strength of each cause rather than chronology.

Subrogation transfers the insured's recovery rights against a negligent third party to the insurer after indemnity is paid; the insurer cannot recover more than it paid and cannot prejudice the insured's uninsured losses.

Contribution applies where two or more indemnity policies cover the same interest against the same peril; each insurer pays rateably, commonly by independent liability or maximum liability methods.

Risk classification distinguishes pure risk (loss or no loss) from speculative risk (loss or gain); insurance transfers pure risk, and only fortuitous, measurable, independent and non-catastrophic exposures are ideally insurable.

Moral hazard concerns dishonest intent (e.g. arson for profit), while morale hazard is carelessness or indifference created by the presence of insurance; underwriting controls differ for each.

Law of large numbers: as the number of similar independent exposure units increases, actual loss experience converges on expected loss, enabling credible ratemaking and reduced loading for uncertainty.

A contract of insurance requires offer, acceptance, consideration (premium), intention to create legal relations, capacity and legality; the policy document is evidence of the terms but not the contract itself.

Regulatory regimes typically require authorisation to carry on regulated insurance activity, with criminal or civil sanctions for carrying on without permission; appointed representatives act under a principal's authorisation.

Solvency requirements are usually risk-based: capital must cover a prescribed confidence level over a one-year horizon, with a minimum floor and a higher risk-sensitive requirement, plus governance and reporting (own-risk assessment) obligations.

Treating customers fairly and conduct rules are enforced through principles-based supervision: product governance, fair value assessments, complaints handling, and prohibition of misleading financial promotions.

Statutory or regulatory time bars and limitation periods restrict claims and litigation; notification conditions precedent can defeat a claim if breached, so wording must be checked before advising.

Consumer protection law typically implies terms that insurance contract terms be fair and transparent; unfair terms are not binding, and ambiguous terms are construed contra proferentem against the drafter.

Data protection law requires a lawful basis for processing, transparency, data minimisation, security and breach notification; special-category data such as health information needs additional safeguards.

Anti-money laundering rules require customer due diligence, beneficial ownership identification, ongoing monitoring, sanctions screening and suspicious activity reporting to the financial intelligence unit.

Complaints to an ombudsman or regulator must be handled within prescribed timescales; final ombudsman decisions are binding on the firm but not on the complainant, who retains court rights.

Premium = expected loss cost (frequency x average severity) + expenses + profit margin + risk/uncertainty loading; technical premium excludes investment income, which is added in the office premium.

Loss ratio = incurred losses / earned premium; expense ratio = expenses / written premium; combined ratio = loss ratio + expense ratio, with under 100% indicating underwriting profit.

Proposal form questions must be material and clear; non-disclosure or misrepresentation allows avoidance or proportionate remedy depending on whether it was deliberate, reckless or innocent under applicable law.

Risk selection tools include physical surveys, claims history, credit or fraud databases, sanctions and PEP screening, and aggregation checks against catastrophe and single-risk accumulations.

Rating factors must be actuarially justified and non-discriminatory; proxy discrimination arises where a neutral factor correlates with a protected characteristic.

Reinsurance structures: quota share cedes a fixed percentage; surplus share cedes amounts above a retention; excess of loss covers losses above an attachment point up to a limit, often with reinstatements.

Facultative reinsurance is placed risk by risk and allows declinature; treaty reinsurance is automatic for risks falling within its terms and obliges cession and acceptance.

Aggregation and accumulation control: underwriters must assess maximum probable loss and probable maximum loss for catastrophe perils and avoid unintended concentration across policies and territories.

Terms of trade: warranties, conditions precedent to liability, excesses, deductibles, co-insurance and average clauses all shift loss back to the insured and must be priced and explained.

Claims lifecycle: notification and registration, coverage verification, reserving, investigation and evidence gathering, liability and quantum assessment, settlement or repudiation, recovery and subrogation, closure and review.

Reserving methods include case reserves per claim, average cost per claim, chain-ladder development factors and Bornhuetter-Ferguson; reserves must include IBNR and ULAE.

Liability analysis asks: is there a policy in force, does the loss fall within an insured peril, is any exclusion engaged, and were conditions precedent complied with? The burden of proving an insured loss generally rests on the insured.

Quantum for property is usually reinstatement or indemnity value less salvage and excess; for liability it covers damages, defence costs and claimant expenses, subject to limits and aggregation.

Fraud indicators include late notification, inconsistent accounts, exaggerated or undocumented losses, prior similar claims, and pressure for fast cash settlement; investigation must be proportionate and documented.

A repudiation must state the policy basis precisely; poor communication is a common source of complaints and regulatory censure even where the decision is correct.

Third-party liability claims require assessment of legal liability (negligence, breach of statutory duty, contract), causation, remoteness and contributory negligence before valuing damages.

Salvage and subrogation recoveries reduce net claims cost; recoveries must be pursued within limitation periods and without prejudicing the insured's position.

Complaints and disputes escalate through internal review, then ombudsman or arbitration or litigation; root-cause analysis of claims complaints should feed back into underwriting and product design.

Balance sheet: assets (investments, reinsurance recoverables, receivables) less liabilities (unearned premium reserve, outstanding and IBNR claims, other provisions) equals capital and reserves.

Technical provisions comprise unearned premium reserve (UPR) and claims provisions; UPR is typically earned on a daily or monthly pro-rata basis over the policy period.

Profit = underwriting result + investment return - tax; underwriting result = earned premium - incurred claims - expenses.

Investment policy must match liabilities in duration and currency; assets backing technical provisions are subject to prudential diversification and admissibility limits.

Cash flow and liquidity management: premiums are received upfront while claims are paid later, so insurers must hold liquid assets to meet unexpected claim surges.

Capital management tools include reinsurance, quota-share cessions, subordinated debt, equity issuance and retrocession; capital adequacy is tested against stress scenarios.

Expense management distinguishes acquisition costs (commission, brokerage) from administrative and claims handling expenses; deferred acquisition costs are amortised with premium.

Performance metrics: return on equity, return on capital, combined ratio, retention ratio, premium growth and reserve adequacy (favourable or adverse development).

Reinsurance recoverables are a credit exposure; counterparty security, collateral and concentration limits must be monitored and disclosed.

Core systems typically comprise policy administration, claims management, billing and collections, underwriting workbench, and a data warehouse or reporting layer.

Straight-through processing (STP) automates quote, underwrite, issue and renew for low-complexity risks; exceptions route to human underwriters via defined referral rules.

Robotic process automation handles repetitive rule-based tasks; machine learning supports pricing, fraud detection and triage but requires explainability and bias testing for regulated decisions.

Data quality controls: completeness, accuracy, timeliness, consistency and lineage; poor data undermines pricing, reserving and regulatory reporting.

Cyber and operational resilience: access controls, encryption, multi-factor authentication, backup and recovery, incident response plans and third-party/vendor risk management.

Outsourcing and cloud arrangements require due diligence, contractual data protection terms, exit plans and regulatory notification where material.

E-commerce and distance selling rules require clear pre-contract information, cancellation rights where applicable, and durable-medium confirmation of terms.

Claims automation (photo or AI damage assessment) must retain audit trails and human review routes for disputed or high-value claims.

Key performance indicators for operations include quote-to-bind time, claims cycle time, first-contact resolution, leakage rate and cost per transaction.

Treating customers fairly outcomes typically cover: fair culture, fair product design, clear information, suitable advice, products performing as promised, and no unreasonable post-sale barriers.

Vulnerability: firms must identify customers with health, life-event, resilience or capability limitations and adapt communication and processes; vulnerability is dynamic, not a permanent label.

Product value assessment requires evidence that benefits are proportionate to price, including for distribution chains and add-on products.

Conflicts of interest must be identified, avoided or managed and disclosed; remuneration structures must not incentivise mis-selling.

Clear, fair and not misleading communications: plain language, prominent risk warnings, balanced past-performance presentation, and no hidden charges.

Suitability and appropriateness: advised sales require a suitability assessment; non-advised sales require clear information so the customer can make an informed decision.

Complaints data and root-cause analysis are conduct risk indicators; recurring complaints should trigger product or process remediation and possible redress exercises.

Ethical decision framework: identify stakeholders, legal and regulatory duties, consequences, fairness and transparency; document the rationale so decisions are defensible.

Post-sale fairness includes renewal transparency, fair treatment at claim, and no penalty or barrier for customers who shop around or switch.

Corporate strategy frameworks: SWOT, PESTLE, Porter's five forces and value-chain analysis applied to underwriting appetite, distribution and capital allocation.

Strategic options include organic growth, niche specialisation, MGA or coverholder arrangements, partnerships and bancassurance, mergers and acquisitions, and portfolio exit.

Capital allocation uses risk-adjusted return on capital (RAROC) and economic value added; business units compete for capital based on risk-adjusted profitability.

Enterprise risk management (ERM) integrates risk appetite statements, risk registers, scenario and stress testing, key risk indicators and board-level oversight.

Climate and catastrophe strategy: physical, transition and liability risks; scenario analysis, accumulation modelling, and product innovation such as parametric covers.

Digital transformation strategy must balance customer experience, cost-to-serve, legacy migration risk and regulatory change; change programmes need strong governance.

Distribution strategy distinguishes brokers, agents, direct, affinity and digital channels; commission and remuneration models must align with customer outcomes.

Market cycle management: soft markets erode margins, driving underwriting discipline, expense reduction and portfolio pruning; hard markets allow rate strengthening and terms tightening.

Due diligence in M&A covers reserves, reinsurance recoverables, conduct legacy, IT systems and cultural fit; integration risk often exceeds the transaction price risk.