III IC-11 cheat sheet

Insurance transfers risk from an individual to a pool of policyholders; the insurer's promise is backed by reserves and capital, not by charity.

Insurable interest must exist at the time of loss for property insurance and at inception for life insurance; without it the contract is void.

Utmost good faith (uberrimae fidei) obliges both parties to disclose material facts; misrepresentation or non-disclosure can make a life policy voidable.

Indemnity restores the insured to the pre-loss financial position; life insurance is a benefit policy, not a contract of indemnity, because a human life cannot be valued in money.

Proximate cause is the dominant, effective cause of loss; remote causes do not trigger cover unless the policy states otherwise.

Subrogation lets the insurer step into the insured's legal rights after paying a claim; it does not apply to life insurance policies.

Contribution applies when two or more policies cover the same loss and the same interest; each insurer pays its rateable share.

Risk classification pools lives by age, sex, health and occupation; the premium must reflect the expected claim cost of the class, or adverse selection follows.

Reinsurance transfers part of the insurer's risk to another insurer; it does not change the original policyholder's contractual rights.

Net premium covers mortality and interest only; gross (office) premium adds expense loading, contingency margin and, where relevant, tax.

Level premium whole life builds a reserve because premiums exceed the cost of insurance in early years; the reserve is a liability of the insurer.

Term insurance pays only on death within the term and builds no cash value; whole life combines death cover with a savings element.

Underwriting assesses moral hazard and physical hazard; standard lives are accepted at ordinary rates, substandard lives at extra premium, lien, or exclusion.

Non-forfeiture options on a lapsed policy with value include reduced paid-up insurance, extended term insurance and cash surrender.

Policy loans are advances against surrender value; unpaid loan and interest are deducted from the death benefit or maturity claim.

Grace period (commonly 30 days) keeps cover in force after a due date; reinstatement usually requires evidence of insurability and payment of arrears.

Suicide exclusion clauses typically apply only for a limited initial period (often 12 months), after which the full sum assured is payable.

Claim settlement requires proof of death, policy documents and claimant identity; insurers pay within statutory timelines once the claim is admitted.

Insurance is regulated to protect policyholders, ensure solvency and promote fair market conduct; the regulator licenses insurers, agents and brokers.

Capital and solvency requirements force insurers to hold a margin of assets over liabilities; breach triggers supervisory action or restriction on new business.

Know-your-customer and anti-money-laundering rules require identity verification, source-of-funds checks and suspicious transaction reporting.

Product filing regimes vary: some markets require prior approval of policy wordings and rates, others allow file-and-use or use-and-file.

Agents represent the insurer; brokers represent the policyholder. Disclosure of commission and conflicts is a standard conduct requirement.

Mis-selling, rebating and unauthorised rebates are prohibited; cooling-off or free-look periods let the policyholder cancel within a set number of days.

Premium payment in cash above prescribed limits is restricted; most markets require payment through banking channels for large amounts.

Grievance redressal is layered: internal complaints first, then the regulator or an ombudsman, with binding awards up to a monetary cap.

Record-keeping and reporting obligations require insurers to maintain policy, claim and financial records and file periodic returns to the regulator.

Assets = Liabilities + Shareholders' funds; policyholder liabilities include reserves, outstanding claims and unearned premium where relevant.

The mathematical reserve is the present value of future benefits minus the present value of future net premiums, valued on prescribed mortality and interest bases.

Solvency margin = admissible assets minus liabilities, expressed as an absolute amount or a ratio to required solvency; only admissible assets count.

Valuation actuarial assumptions are prudent: a conservative (lower) valuation interest rate and prudent mortality increase reserves.

Embedded value = net asset value plus present value of future profits from in-force business; it is not the same as the statutory surplus.

Surplus (bonus) distribution depends on the with-profits fund's investment return, mortality experience and expense experience versus assumptions.

Investment policy matches assets to liability duration; long-dated life liabilities favour longer-duration bonds and limit illiquid holdings.

Expense analysis separates acquisition costs (commission, underwriting) from maintenance costs; high acquisition cost strains new-business surplus.

Reinsurance accounting records ceded premiums as an outflow and reinsurance recoveries as an asset; net retained risk drives capital needs.