IIQE Paper 2 flashcards

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

Insurable interest

A legal or pecuniary relationship to the subject matter such that the insured benefits from its preservation or suffers loss on the insured event. Required for indemnity policies at inception and at loss.

Indemnity principle

The insured is restored to the pre-loss financial position, no better and no worse. Applies to property and liability insurance; life and personal accident policies pay fixed benefits instead.

Utmost good faith

Both parties must disclose all material facts before the contract. A fact is material if a prudent insurer would be influenced in accepting the risk or setting the premium.

Proximate cause

The dominant and effective cause of a loss. If the proximate cause is an excluded peril, the claim is not payable even if an insured peril also contributed.

Subrogation

After paying an indemnity claim, the insurer steps into the insured's shoes to recover from the third party responsible. Recovery is limited to the amount paid.

Contribution

Where two or more indemnity policies cover the same loss, insurers share the loss pro rata or by independent liability. The insured cannot recover more than the actual loss.

Insurance Authority

The statutory regulator of insurers and insurance intermediaries in Hong Kong, established under the Insurance Ordinance. It licenses intermediaries, supervises solvency and enforces conduct requirements.

Fit and proper test

The licensing standard applied to insurance intermediaries covering qualifications, experience, financial soundness, integrity and compliance with IIQE and CPD requirements.

Insurance agent vs broker

An agent represents and is appointed by one or more insurers. A broker acts for the policyholder, is independent of insurers and must hold professional indemnity insurance.

Client money segregation

Intermediaries must hold client premiums in a designated client account separate from their own funds to protect policyholders and avoid misuse of funds.

Customer due diligence

Anti-money-laundering requirement to identify clients, verify identity, establish source of funds and keep records for at least five years under the AMLO and IA guidelines.

Financial needs analysis

A structured assessment of the client's circumstances, needs and risk profile before recommending a product, with records kept to demonstrate suitability of advice.

Warranty in insurance

A policy term that must be strictly complied with. Breach discharges the insurer from liability from the date of breach, regardless of whether the breach caused the loss.

Condition precedent to liability

A policy condition the insured must satisfy before the insurer becomes liable to pay, such as prompt notification, proof of loss and cooperation with investigation.

Contra proferentem

A rule of construction whereby ambiguity in a policy term is interpreted against the party who drafted it, usually the insurer.

Policy schedule

The document stating the insured, period, sums insured, premium and endorsements. Where it conflicts with the standard wording, the schedule normally prevails.

Cover note

A temporary document providing interim insurance cover pending issue of the full policy. It is a contract of insurance and binds the insurer from its stated date.

Limitation period

The time limit for bringing a legal claim. In Hong Kong, contract and tort claims are generally subject to six years under the Limitation Ordinance.

No-claims discount

A motor rating discount that increases with each claim-free year and is reduced or reset after a claim, rewarding favourable claims experience.

Average clause

A pro rata reduction of a property claim where the sum insured is less than the value at risk, discouraging underinsurance.

Excess vs franchise

An excess is deducted from each claim; a franchise means the insurer pays nothing if the loss is below the threshold but pays the full loss once exceeded.

IBNR reserves

Incurred but not reported reserves set aside for claims that have occurred but not yet been notified to the insurer, estimated using actuarial methods.

Loss adjuster

An independent specialist appointed by the insurer to investigate a large or complex claim, verify the cause and quantum, and recommend settlement.

Business interruption cover

Covers loss of gross profit and increased cost of working following insured property damage, subject to an indemnity period selected by the insured.

Employers' compensation

Compulsory cover under Cap. 282 for legal liability to employees for injury or death arising out of and in the course of employment in Hong Kong.

Motor third-party risks

Compulsory liability cover under Cap. 272 for bodily injury and property damage caused to third parties by insured vehicles on Hong Kong roads.

Personal accident policy

Pays fixed benefits for accidental death, permanent disability and temporary disablement. An accident requires an external, violent, visible and fortuitous event.

Claims-made liability policy

Responds to claims first made against the insured during the policy period, regardless of when the injury or damage occurred, usually with a retroactive date.

Travel insurance exclusions

Common exclusions include pre-existing medical conditions, adventure sports, travel against medical advice and losses arising from war or terrorism.

Risk treatment options

Avoid, reduce, transfer or retain a risk. Insurance transfers the financial consequence of a pure risk to an insurer but does not eliminate the risk itself.

Quota share treaty

A reinsurance arrangement in which the reinsurer accepts a fixed percentage of every risk and premium written by the ceding insurer, sharing losses proportionally.

Excess of loss reinsurance

The reinsurer pays losses above the ceding insurer's retention up to an agreed limit, typically used to protect against large individual losses or catastrophes.

Probable maximum loss

An estimate of the largest loss likely from a single event, such as a typhoon, used to size retentions and design the reinsurance programme.