III IC-47 / A-1 key terms

A legal or financial relationship in which the policyholder benefits from the continued existence of the insured subject and suffers measurable loss if it is damaged or destroyed. It must exist at inception, and usually at the time of loss.

A duty on both parties to an insurance contract to disclose all material facts honestly and without being asked. Failure by the proposer can let the insurer avoid the policy or reduce a claim.

The principle that a property or liability claim should restore the insured to the financial position held before the loss, no better and no worse, subject to the sum insured and policy limits.

The insurer's right, after paying a claim, to stand in the insured's place and recover the loss from the responsible third party, preventing the insured from being paid twice.

The rule that where two or more policies cover the same loss on the same interest, each insurer pays its rateable share, so the insured cannot recover more than the actual loss.

The dominant, effective cause of a loss - the event that sets the others in motion without a break in the chain. Insurers apply it to decide whether a policy responds.

The risk that an insured's attitudes, intentions or dishonesty change behaviour after cover is bought, increasing the likelihood or size of a claim. It is often assessed through background checks and claim history.

The tendency for people who know they face higher-than-average risk to buy or keep insurance, leaving the insurer with a worse-than-average pool unless underwriting and pricing correct for it.

Insurance bought by an insurer to transfer part of its risk to another insurer, protecting solvency and capacity. It may be proportional, such as quota share, or non-proportional, such as excess of loss.

Formal authorisation from a regulator that allows a person or company to carry on specified insurance activities. Acting without it is unlawful and typically voidable and subject to penalties.

The excess of an insurer's admissible assets over its liabilities, measured against a regulatory minimum. It shows whether the company can meet obligations with a prudent buffer after adverse events.

A regulatory test of the honesty, competence, financial soundness and reputation of directors, controllers and key staff, used when granting or renewing authorisation and approving significant appointments.

Controls that insurers and intermediaries must operate to detect, report and prevent the use of policies to launder criminal proceeds, including suspicious transaction reports and record keeping.

A conduct standard requiring insurers to design, sell and service products so customers get clear information, suitable advice and fair outcomes, not only at point of sale but throughout the policy's life.

A minimum liability that an insurer must record on its balance sheet for obligations already incurred, such as unearned premium or outstanding claims, computed under regulatory rules rather than management judgement.

Regulation of how insurers behave towards customers and competitors - distribution, disclosure, advertising, claims handling and complaints - as distinct from prudential rules about financial strength.

An independent scheme for settling complaints between policyholders and insurers without court proceedings, usually free to the customer and able to award limited compensation that the insurer must accept.

The process of evaluating a proposed risk, deciding whether to accept it, on what terms, and at what price, and setting any exclusions, excesses or conditions needed.

The portion of a risk an insured or insurer deliberately keeps rather than transfers, whether through an excess, a self-insured layer or a decision not to buy cover.

The measure of what is at risk - the value, units or period subject to loss - and the basis on which premiums and limits are calculated, such as turnover or numbers of employees.

A condition that increases the chance or severity of a loss from a peril, such as poor wiring, a slippery floor or a careless workforce. It is distinct from the peril itself.

An estimate of the largest loss a property or portfolio is likely to suffer under a defined set of adverse but realistic circumstances, used to size capacity and reinsurance.

Incurred claims and claims expenses divided by earned premium over a period, expressed as a percentage. It is a core indicator of underwriting performance and pricing adequacy.

A policy term the insured promises to satisfy, such as an alarm being maintained, where breach traditionally entitles the insurer to refuse a claim regardless of whether the breach caused the loss.

A policy provision that removes specified perils, property or circumstances from cover, keeping risk within what the insurer intended to underwrite and priced for.

A clause that restores the sum insured after a partial loss, typically on payment of extra premium pro rata for the remaining period, so full cover is available for a later loss.

The insured's duty to tell the insurer promptly about a loss or circumstance that may give rise to one, with the timing and information required set by the policy conditions.

An independent specialist appointed to investigate a claim, quantify the damage and recommend settlement to the insurer, working from the policy wording and evidence gathered on site.

A formal statement, often supported by invoices, inventories or expert reports, by which the insured substantiates the amount claimed. Policies usually set a deadline and require it to be signed.

Damaged property or its remaining value that the insurer takes over after paying a total loss, or the proceeds from selling it, which reduce the net cost of the claim.

A loss where the subject matter is not destroyed but the cost of recovering or repairing it exceeds its insured value, so the insurer may treat it as a total loss.

The improvement in the insured's position when a claim pays for new replacement items instead of worn ones. Insurers usually deduct an amount for the old item's age and condition.

Incurred but not reported - a reserve for claims that have already occurred but are not yet notified or fully recorded at the reporting date, estimated using development patterns and actuarial judgement.

A claim knowingly presenting false information or concealing material facts to obtain payment not due. Consequences can include rejection, recovery of money paid, cancellation and criminal prosecution.

The estimate set aside for a specific reported claim, based on the adjuster's assessment of likely ultimate cost, reviewed and revised as the claim develops.