III IC-11 flashcards
III IC-11 · Build recall with a focused review session.
34 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Insurable Interest
- A financial or legal relationship such that the policyholder benefits from the continued life of the insured and would suffer loss from that person's death.
- Utmost Good Faith
- The mutual duty of insurer and proposer to disclose all material facts relevant to the risk; breach can allow the insurer to avoid the contract.
- Contract of Indemnity
- An agreement restoring the insured to the same financial position as before the loss. Life insurance is not one, since a life cannot be valued in money.
- Proximate Cause
- The dominant and effective cause of a loss, without which the loss would not have occurred. Policies pay only when the proximate cause is covered.
- Subrogation
- The insurer's right, after paying a claim, to pursue third parties responsible for the loss. It is inapplicable to life insurance benefits.
- Adverse Selection
- The tendency of higher-risk individuals to buy more insurance than lower-risk ones, which raises claim costs unless premiums reflect risk class.
- Reinsurance
- An arrangement in which an insurer cedes part of its risk and premium to another insurer to reduce exposure and free capital.
- Moral Hazard
- Risk arising from the insured's behaviour or character, such as concealment, over-insurance or intent to claim, rather than from physical condition.
- Net Premium
- The portion of a life insurance premium covering only expected mortality cost and interest, excluding expense loading and profit margin.
- Gross Premium
- The total premium charged to the policyholder, comprising net premium plus loading for expenses, contingencies, profit and applicable taxes.
- Policy Reserve
- The actuarial liability built up in a level-premium policy, representing the present value of future benefits less future net premiums.
- Term Insurance
- Cover paying the sum assured only if death occurs within a stated term; it builds no cash value and is usually the cheapest form.
- Non-Forfeiture Options
- Choices available on lapse of a policy with value: reduced paid-up insurance, extended term insurance, or surrender for cash.
- Policy Loan
- An advance secured against a policy's surrender value, repaid with interest or deducted from the claim or maturity benefit.
- Grace Period
- A short period, commonly thirty days, after a premium due date during which cover continues before the policy lapses.
- Reinstatement
- Restoration of a lapsed policy, usually requiring payment of arrears with interest and evidence of continued insurability.
- Suicide Exclusion
- A clause limiting or denying payment if death by suicide occurs within an initial period, commonly twelve months from issue.
- Underwriting
- Assessment of a proposed life for physical and moral hazard to decide acceptance, rating class, extra premium or decline.
- Free-Look Period
- A statutory window after receiving the policy in which the policyholder may cancel and receive a refund of premium, less charges.
- Regulatory Licence
- Formal authorisation from the insurance regulator required before an insurer, agent or broker may transact insurance business.
- Solvency Margin
- The excess of admissible assets over liabilities that an insurer must maintain, providing a buffer against adverse experience.
- Know Your Customer
- Identity verification and due diligence on policyholders and beneficial owners, required under anti-money-laundering and counter-terrorism rules.
- Agent Versus Broker
- An agent acts for the insurer and can bind it; a broker acts for the policyholder and owes duties of advice and disclosure.
- Mis-selling
- Sale of a policy through misleading statements or unsuitable advice, a conduct breach attracting regulatory penalty and remediation.
- Grievance Redressal
- The complaint process for policyholders: internal insurer review first, then escalation to the regulator or an insurance ombudsman.
- Product Filing
- The process of submitting policy terms and rates to the regulator, under prior-approval, file-and-use or use-and-file regimes.
- Admissible Assets
- Assets the regulator accepts for solvency calculation, excluding items such as certain receivables, intangibles and holdings above concentration limits.
- Mathematical Reserve
- The present value of future policy benefits minus the present value of future net premiums, computed on prescribed mortality and interest bases.
- Embedded Value
- Net asset value plus the present value of expected future profits from in-force business, used to measure a life insurer's worth.
- Asset-Liability Matching
- Aligning investment duration, currency and liquidity with expected claim payments so assets meet liabilities as they fall due.
- With-Profits Fund
- A pooled fund where policyholders share investment, mortality and expense experience through declared bonuses or dividends.
- Acquisition Cost
- Costs of writing new business such as commission, medicals and issue expenses, which reduce new-business surplus when incurred.
- Valuation Interest Rate
- The conservative rate used to discount future liabilities; a lower rate increases reserves and strengthens the solvency position.
- Surrender Value
- The amount payable to a policyholder who terminates a policy with accumulated value before maturity or death.