III IC-47 / A-1 flashcards

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

Principle of indemnity

The insured is restored to the same financial position as immediately before the loss, no better and no worse; it caps recovery at the actual loss and bars profit from insurance.

Insurable interest

A legally recognised financial relationship between the insured and the subject matter, such that its loss or damage causes the insured pecuniary disadvantage, and which is required for a valid policy.

Utmost good faith

A reciprocal duty on proposer and insurer to disclose every material fact and avoid misrepresentation; breach allows the aggrieved party to avoid the contract or claim damages.

Proximate cause

The dominant, effective and operative cause of a loss, without which the loss would not have occurred; remote causes are disregarded when deciding whether a peril is covered.

Subrogation

The insurer's right, after paying an indemnity, to step into the insured's legal position and recover the loss from the third party responsible, limited to the amount paid.

Contribution

The right of one insurer to recover a proportionate share from other insurers covering the same interest against the same peril for the same period, preventing double recovery beyond the actual loss.

Law of large numbers

As the number of independent, homogeneous exposure units increases, actual loss experience converges on the expected value, reducing relative uncertainty and allowing more stable, predictable premium rates.

Moral hazard

The increased probability of loss, or inflation of a claim, caused by the insured's behaviour after cover is granted, because the financial consequence of loss is transferred to the insurer.

Solvency margin

The excess of an insurer's admissible assets over its liabilities, held as a regulatory capital buffer so that policyholder obligations can still be met in adverse scenarios.

C-ROSS II

China's risk-oriented solvency regime, which sets a comprehensive solvency ratio of available to minimum capital, with a supervisory floor of 100% and a core ratio floor of 50%.

Product filing and approval

Most insurance products must be filed with the regulator before sale, while prescribed categories such as compulsory motor third-party liability and agricultural insurance require prior approval.

Free-look period

A period of at least 15 days after a policyholder receives a life insurance contract with a term over one year, during which cancellation brings a refund of premium.

Policyholder Protection Fund

A statutory fund, financed by levies on insurers and managed by the regulator, that pays claims or transfers contracts when an insurer is revoked, dissolved or insolvent.

Client due diligence

Anti-money-laundering procedures requiring identification and verification of policyholders, beneficiaries and beneficial owners, plus ongoing monitoring and reporting of suspicious transactions to the financial intelligence unit.

Claims payment deadlines

Under China's Insurance Law an insurer must assess a claim within 30 days of receiving complete materials and pay within 10 days of agreement, with provisional payment after 60 days.

Market conduct supervision

Regulation of the fair treatment of customers across product design, distribution, disclosure and claims, enforced through licensing conditions, on-site inspection, fines and remediation orders.

Loss ratio

Incurred losses plus loss adjustment expenses divided by earned premium for the same period; it measures pricing adequacy for a class or portfolio of business.

Combined ratio

Loss ratio plus expense ratio; a result below 100% means the underwriting operation is profitable before investment income, while a result above 100% means an underwriting loss.

Experience rating

A rating method that adjusts manual premium by comparing the insured's own past loss record with the average for its class, rewarding better-than-average risk and penalising worse.

Probable maximum loss

The largest loss reasonably expected from a single event assuming protective systems function as designed; it is used to set retentions, limits and reinsurance purchases.

Facultative reinsurance

Reinsurance of a single risk, offered and accepted risk by risk, used for sums insured or hazards that fall outside the terms and capacity of the ceding insurer's treaties.

Treaty reinsurance

A standing agreement under which the reinsurer automatically accepts all risks of a defined class that fall within stated capacity, in return for a share of premium.

Warranty

A policy term that must be complied with exactly; breach entitles the insurer to avoid liability for the loss even if the breach did not cause it.

Co-insurance clause

A property clause requiring insurance to an agreed percentage of value; if the insured carries less, each claim is reduced in the proportion that the sum insured bears to that percentage.

First notice of loss

The insured's initial report to the insurer giving the date, cause, circumstances and apparent damage, which starts the claims-handling timetable and triggers reserving.

IBNR reserve

Incurred but not reported reserve: an actuarial estimate of losses that have occurred but are not yet reported, plus expected development on claims already known.

Case reserve

The estimate set for an individual reported claim covering expected indemnity and handling expenses, reviewed and revised as the claim develops toward settlement.

Actual cash value

An indemnity measure equal to replacement cost less depreciation for age and wear, approximating the market value of the damaged property at the time of loss.

Average clause

A clause that reduces a claim for underinsurance: recovery equals the loss multiplied by the sum insured divided by the value at risk at the time of loss.

Salvage

Property remaining after a loss, which the insurer may take over and sell to offset the gross claim, or which stays with the insured against a corresponding deduction.

Constructive total loss

A loss where the subject matter survives but the cost of recovery or repair would exceed its insured value, so the insured may claim as for a total loss.