III IC-102 flashcards

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

Insurable Interest

A legal right to insure recognised by law, existing at inception for life cover and at the time of loss for property, which is affected by the loss of the subject matter.

Utmost Good Faith

The mutual duty of insurer and insured to disclose all material facts before the contract is formed, a material fact being one that influences a prudent underwriter's decision.

Principle of Indemnity

The insured is restored to the same financial position held immediately before the loss, no better and no worse; the principle does not apply to life or personal accident insurance.

Proximate Cause

The dominant, effective, and efficient cause of a loss. Remote causes do not trigger cover unless the policy wording expressly extends to them.

Subrogation

After paying a claim, the insurer acquires the insured's rights of recovery against a negligent third party, limited to the amount paid, so the insured cannot recover twice.

Contribution

Where two or more policies cover the same interest, subject matter, and peril, each insurer pays a rateable share, commonly by the independent liability or maximum liability method.

Average Clause

A condition applied when the sum insured is less than the value at risk, so the claim is reduced in the proportion that the sum insured bears to the full value.

Reinsurance

Insurance of insurers. Facultative reinsurance covers a single risk individually; treaty reinsurance obliges the ceding insurer to cede all risks falling within its defined scope.

Policy Schedule

The part of the policy containing risk-specific data: insured name, sums insured, excesses, period of insurance, and the endorsements that apply to that particular risk.

Condition Precedent

A policy condition that must be satisfied before the insurer is liable to pay. Breach prevents recovery for the affected claim rather than voiding the whole contract.

Warranty in Insurance

A promissory condition that the insured will do or not do something, or that a state of affairs exists; breach discharges the insurer from liability from the date of breach.

Deductible vs Franchise

A deductible is subtracted from the loss before payment; a franchise is a threshold that, once exceeded, makes the entire loss payable with no deduction.

Claims Notification

The insured's duty to notify a loss promptly and provide information and evidence. Late notification is assessed by whether it prejudiced the insurer's investigation.

Excess of Loss Layer

A reinsurance or large-risk structure where the layer responds only for the part of a loss exceeding a stated attachment point, up to the limit of that layer.

Salvage and Recovery

Salvage is the residual value of damaged property retained or sold after a total loss; its proceeds reduce the claim paid, as do recoveries obtained from third parties.

Moral Hazard

A risk indicator arising from the insured's attitude or behaviour, such as poor maintenance or unusual sums insured, that increases the likelihood or size of a claim.

Licensing of Insurers

Regulators authorise insurers to carry on specified classes of insurance business; conducting regulated activity without authorisation is an offence subject to sanction.

Solvency Capital Requirement

The capital an insurer must hold, calculated from underwriting, market, credit, and operational risk modules, with a lower minimum capital requirement acting as an absolute floor.

Minimum Capital Requirement

The lower regulatory capital threshold below which supervisory intervention is triggered, calculated by a simpler formula than the full solvency capital requirement.

Treating Customers Fairly

Conduct rules requiring fair treatment across the product lifecycle: clear product design, transparent disclosure of costs, suitable advice, and fair claims handling.

Customer Due Diligence

Anti-money-laundering measures requiring identification of customers and beneficial owners, risk assessment, enhanced checks for politically exposed persons, and ongoing monitoring.

Suspicious Transaction Report

A report filed with the financial intelligence unit when an insurer suspects money laundering or terrorist financing; tipping off the customer about the report is prohibited.

Insurance Ombudsman

An independent dispute resolution body that considers complaints against insurers after internal complaint procedures are exhausted, typically within binding monetary limits.

Data Protection Principles

Rules requiring lawful, fair, and transparent processing, data minimisation, limited retention, security safeguards, and a lawful basis for cross-border transfers.

Gross Written Premium

The total premium written by an insurer before any deduction, including premium ceded to reinsurers, and the starting point for deriving net written premium.

Net Earned Premium

Net written premium adjusted for the change in unearned premium reserve, representing the portion of premium recognised as income over the expired policy period.

Unearned Premium Reserve

The portion of written premium relating to the unexpired part of the policy term, held as a technical provision; a 24/25ths method suits annual policies written evenly.

Incurred But Not Reported

A reserve for claims that have occurred but have not yet been notified to the insurer, estimated using development patterns and included in incurred claims.

Loss Ratio

Incurred claims divided by net earned premium, expressed as a percentage; it measures underwriting claims cost before expenses are added.

Combined Ratio

The loss ratio plus the expense ratio. A result below 100 percent indicates an underwriting profit; above 100 percent indicates an underwriting loss.

Ceding Commission

A payment from the reinsurer to the ceding insurer that offsets the ceded premium, commonly reimbursing acquisition costs and reducing the net cost of reinsurance.

Deferred Acquisition Costs

Commission and acquisition expenses capitalised as an asset and amortised in line with the earning of premium, matching cost to the period the policy covers.