CIIG Diploma key terms

A legal and financial stake in the subject matter of insurance such that the policyholder benefits from its survival and suffers loss from its damage or destruction. It must exist at inception for indemnity policies.

The rule that a claimant should be restored to the financial position held before the loss, neither better nor worse off. It underpins limits on recovery and the use of reinstatement or repair as settlement methods.

The mutual duty on proposer and insurer to disclose material facts and avoid misleading representations. Breach may allow the insurer to avoid the contract or apply proportionate remedies under modern statute.

Information that would influence a prudent insurer's decision on whether to accept a risk, what premium to charge, or what terms to impose. The test is objective rather than based on the proposer's opinion.

The dominant, effective cause of a loss that sets in motion an unbroken chain of events without intervention. It determines whether a peril is covered where multiple causes contribute to damage.

The insurer's right, after paying a claim, to pursue recovery from the third party responsible, and to take over the insured's related rights. It supports indemnity by preventing double recovery.

The principle allowing an insurer that has paid a loss to recover a proportionate share from other insurers covering the same interest against the same peril. Each insurer pays only its rateable portion.

The increased likelihood of loss arising from the character, conduct, or financial circumstances of the insured, such as carelessness or potential deliberate acts. It influences underwriting and claim scrutiny.

The amount and type of risk an insurer is willing to accept in pursuit of its objectives, expressed through limits, classes, territories, and pricing tolerances. It guides underwriting and capital decisions.

The characteristics used to price a risk, such as age, occupation, sum insured, claims history, and hazard features. They must be relevant, evidence-based, and applied consistently to avoid unfair discrimination.

The proposer's obligation to volunteer material information to the insurer before cover is arranged, including facts not asked about in the proposal. It operates alongside questions answered on the form.

A term in the policy that must be complied with exactly, whether or not it relates to the risk. Breach may suspend or discharge cover depending on the applicable statutory regime.

A policy condition that must be satisfied before the insurer's liability arises or before a claim becomes payable, such as notifying a claim promptly or providing proof of loss.

A provision that removes specified perils, circumstances, or losses from cover. Courts construe ambiguous exclusions narrowly against the insurer, and the burden of proving an exclusion often falls on the insurer.

The legal rule that a policyholder must stand in a recognised relationship to the subject matter so that the contract is not a wager. It applies to property, liability, and life-related covers.

The prompt communication by the insured to the insurer of a loss or circumstance that may give rise to a claim, enabling investigation while evidence is fresh and reserving rights under the policy.

An independent or insurer-appointed specialist who investigates the cause and extent of a loss, verifies the claim, and recommends settlement. They act as a fact-finder rather than as the insured's representative.

The process of estimating funds needed to meet claims already incurred but not yet settled, including incurred-but-not-reported claims. Adequate reserves protect solvency and inform financial reporting.

Claims that have occurred before the reporting date but have not yet been notified to the insurer. They form part of technical reserves and are estimated using actuarial methods.

The financial resources an insurer must hold above its technical provisions to absorb adverse events and remain able to pay claims. It is measured against regulatory capital requirements.

Insurance purchased by an insurer to transfer part of its risk portfolio to another insurer, protecting capital and enabling larger or more concentrated risks to be written. It may be proportional or excess of loss.

The amount or proportion of risk an insurer keeps for its own account after ceding risk to reinsurers, whether through a deductible, quota share, or surplus arrangement.

A conduct framework requiring firms to deliver fair outcomes across the product lifecycle, including clear information, suitable advice, fair pricing, and effective complaint handling. It is assessed through outcomes, not just processes.

A regulatory standard requiring firms to act to deliver good outcomes for retail customers in products, price and value, consumer understanding, and consumer support. It raises the bar above mere disclosure.

Customers whose circumstances, such as health, financial resilience, or capability, make them more susceptible to harm or disadvantage in dealing with insurance. Firms must identify and respond appropriately.

The controls a firm uses to design, approve, monitor, and review products so they meet identified customer needs and deliver fair value. It includes target market definition and distribution oversight.

A structured review of whether a product provides fair value to its target market, weighing price against benefits, services, and charges. It is a core expectation of the consumer-focused regime.

The documented process for receiving, investigating, and resolving customer dissatisfaction within regulated timeframes, with escalation to an ombudsman where required. Outcomes and root causes must be monitored.

An independent dispute-resolution body that can adjudicate complaints between customers and regulated firms, awarding redress where it finds the firm acted unfairly or failed to meet standards.

The defined limits within which an underwriter may accept risks, set terms, and bind cover, expressed by premium, sum insured, class, or territory. It supports consistent risk selection and control.

The process of deciding which risks to accept, decline, or modify, and on what terms, based on hazard assessment and appetite. It balances growth against loss exposure and capital use.

The use of statistical and probabilistic techniques to estimate expected claims, expenses, and profit margins, producing technical premiums and informing reserving and capital modelling.

A pricing mechanism that reduces premium after claims-free periods and may step back or be removed following a claim. It rewards favourable experience and must be explained clearly to customers.

A policy provision that reduces claims in proportion to underinsurance, comparing the sum insured with the value at risk. It prevents policyholders recovering as if fully insured when they are not.

An improvement in the insured's position resulting from repair or replacement with new or superior property. Insurers typically deduct for betterment to preserve the indemnity principle.

The maximum amount an insurer will pay under a policy, or the declared value of the property covered. It is used to test adequacy of cover and apply underinsurance provisions.

Deliberate deception to obtain an undeserved benefit, such as exaggerated claims, staged incidents, or non-disclosure of material facts. It is managed through screening, investigation, and proportionate sanctions.