III IC-76 key terms

A legally recognised financial relationship in which the policyholder benefits from the continued existence of the insured subject and suffers measurable loss if it is damaged or lost. It must exist at inception and, for property, at the time of loss.

The mutual duty on proposer and insurer to disclose all material facts honestly and without concealment. Breach by the proposer can allow the insurer to avoid the contract; breach by the insurer exposes it to liability and regulatory action.

Any information that would influence a prudent underwriter in deciding whether to accept a risk, what premium to charge, or what terms to impose. Examples include prior claims, hazardous occupations, and existing insurance on the same subject.

Failure by the proposer to reveal a material fact that the insurer needs for underwriting, whether innocent, negligent, or deliberate. Its remedy depends on the applicable law and the policy's basis-of-contract wording.

An inaccurate or misleading statement of fact made by the proposer or the insurer during negotiations. If material and relied upon, it may entitle the aggrieved party to avoid the contract or claim a remedy.

The principle that a property or liability policy restores the insured to the financial position held before the loss, no better and no worse. It prevents profit from loss and underpins subrogation and average.

The insurer's right, after paying a claim, to step into the insured's legal position and recover the loss from the party responsible. It supports indemnity and prevents double recovery by the insured.

The right of one insurer to recover a proportionate share of a loss from other insurers covering the same interest, peril, and subject matter. It applies only where each policy would independently respond to the loss.

The situation where the same insured interest is covered by more than one policy against the same risk, so total sums insured exceed the value at risk. Claims are settled by contribution among the insurers.

The dominant, effective, and efficient cause of a loss, the one that sets the chain of events in motion without a new intervening force. It determines whether a claim falls within the policy's insured perils.

A specific event or hazard listed in the policy as covered, such as fire, lightning, theft, or accidental damage. Losses must be traced to an insured peril through proximate cause to be payable.

A clause that removes specified losses, perils, property, or circumstances from cover. Exclusions define the boundary of the insurer's promise and are read strictly against the party that drafted them.

A policy term that the insured promises to fulfil exactly, such as maintaining a fire alarm or storing goods only in stated premises. Breach may discharge the insurer from liability for the affected loss.

A clause setting out duties and procedures that the insured or insurer must follow, such as notifying claims promptly or submitting to survey. Breach generally affects the specific claim rather than the whole contract.

The maximum amount the insurer will pay under a policy for a covered loss, representing the declared value of the subject matter or the limit of liability. It is the basis for premium calculation and average.

Arises when the sum insured is less than the actual value of the property at risk. On a partial loss, settlement is reduced in the same proportion, so the insured bears part of the loss.

A policy condition that scales down a partial-loss payment by the ratio of sum insured to the value at risk, penalising underinsurance. It applies only where the sum insured is below the required value.

The cost of replacing or rebuilding damaged property with new materials of like kind and quality, without deduction for depreciation. Policies on this basis usually require the sum insured to reflect full rebuilding cost.

The reduction in the value of an asset from wear, tear, age, or obsolescence. It is deducted when settling claims on an indemnity basis but not when a reinstatement or agreed-value basis applies.

The amount of each loss that the insured must bear before the insurer pays anything. It reduces small claims and premium, and may be stated as a fixed sum or a percentage of the loss.

A self-retained amount deducted from a claim, often applied per occurrence or per policy period. Unlike a deductible, it may be compulsory, voluntary, or tiered, and can reduce premium when chosen by the insured.

A threshold below which no claim is paid at all, but once exceeded the full loss is settled without deduction. It differs from an excess, which is always subtracted from the payable amount.

An arrangement where two or more insurers share a single large risk under one policy, each accepting a stated percentage of the sum insured and of every loss. One insurer usually acts as leader.

Insurance purchased by an insurer to transfer part of its accepted risk to another insurer, protecting solvency and enabling larger capacity. It may be proportional or non-proportional and is arranged by treaty or facultatively.

The portion of risk an insurer or reinsurer keeps for its own account after ceding the remainder. Setting retention balances premium growth against capital and volatility of results.

A standing reinsurance agreement under which the reinsurer automatically accepts all risks falling within defined classes and limits. It contrasts with facultative cover, which is negotiated risk by risk.

A reinsurance arrangement in which the reinsurer may accept or decline each individual risk offered by the ceding insurer. It offers flexibility for unusual or large risks outside treaty terms.

The consideration paid by the insured for cover, calculated from rate, sum insured, and risk factors, plus loadings for expenses and profit. It may be adjusted at renewal or by experience rating.

The price per unit of exposure, such as per mille of sum insured or per vehicle, used to compute premium. Rates reflect expected loss frequency and severity plus expense and profit loadings.

A discount on renewal premium granted when no claim has been made in the preceding policy period. It rewards good risk and is common in motor and personal lines.

A method of setting premium that reflects the insured's own past claims record rather than only class averages. It is used for larger or homogeneous risks where credible loss data exists.

The insured's duty to inform the insurer of a loss promptly, in the manner and within the time the policy requires. Late notice can prejudice investigation and may justify rejection or reduction.

The process of assessing a reported loss, verifying cover and quantum, and paying the admissible amount. It may involve surveyors, loss adjusters, and salvage recovery or subrogation.

A qualified professional appointed to inspect risks before acceptance or to assess damage after a loss. Survey reports guide underwriting decisions, risk improvement recommendations, and claim quantum.

The process of evaluating a proposed risk, deciding whether to accept it, and setting terms, premium, and conditions. It uses proposal information, survey reports, and the insurer's underwriting guidelines.

Damaged property or its remains that retains value after a loss. The insurer may sell salvage and credit the proceeds to reduce the claim, or the insured may retain it with a deduction.

The written contract setting out the schedule, operative clause, exclusions, conditions, and endorsements that govern cover. Its terms are interpreted according to contract law and any applicable insurance statute.