III IC-77 key terms

A legal and financial stake in the subject matter of insurance such that the insured benefits from its survival or suffers loss from its damage. It must exist at inception for life cover and at the time of loss for indemnity policies.

The mutual duty on proposer and insurer to disclose all material facts and deal honestly during formation and renewal of the contract. Breach by the proposer may allow the insurer to avoid the policy or adjust the claim.

Any information that would influence a prudent underwriter's decision to accept a risk, set terms, or calculate premium. Examples include prior claims, hazardous occupations, and existing medical conditions.

Failure by the proposer to reveal a material fact the insurer needs to assess the risk, whether deliberate or inadvertent. It may entitle the insurer to avoid the contract or reduce a claim.

The rule that a general insurance claim restores the insured to the financial position held before the loss, no better and no worse. It underpins sum insured adequacy, average clauses, and subrogation.

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

The right of one insurer to recover a proportionate share from other insurers covering the same interest against the same peril. It applies to indemnity policies and prevents over-insurance profit.

Situation where the same insured interest is covered by two or more policies against the same risk, with total sums exceeding the loss exposure. Each insurer contributes rateably to an indemnity claim.

The dominant, effective, and efficient cause of a loss, without which the loss would not have occurred. Insurers pay only where a covered peril is the proximate cause.

The specific event or contingency that causes loss, such as fire, collision, theft, or illness. Perils are the risks listed as covered in a policy, distinct from the hazard that increases their likelihood.

A condition that increases the chance or severity of a loss from a given peril. Physical hazards include poor wiring; moral hazard involves dishonest intent; morale hazard is carelessness.

The risk that an insured behaves dishonestly or less carefully because insurance exists, such as inflating a claim or staging a loss. Underwriters manage it through deductibles, exclusions, and claims investigation.

The maximum amount an insurer will pay under a policy for a covered loss, stated in the schedule. In property cover it should reflect reinstatement value; in liability it caps the insurer's obligation.

Provision reducing a property claim in proportion to under-insurance, calculated as sum insured divided by value at risk times the loss. It penalises insureds who insure for less than full value.

Insuring property for a sum below its true value at risk, so that a partial loss is not fully recoverable where average applies. It also leaves the insured bearing the shortfall personally.

The amount of each loss the insured must bear before the insurer pays, or a fixed first-loss retention. It reduces premium and discourages small or frivolous claims.

A first amount of any claim that the insured retains, deducted from the settlement. Compulsory excesses apply by policy terms; voluntary excesses are chosen in exchange for premium reductions.

A policy provision that removes specified perils, property, persons, or circumstances from cover. Clear exclusions define the boundary of the insurer's promise and are read strictly against the insurer.

A policy term that the insured promises to fulfil exactly, such as maintaining a fire alarm or restricting vehicle use. Breach may discharge the insurer from liability, depending on applicable law.

A requirement the insured must satisfy before the insurer's liability arises, such as notifying a claim promptly or obtaining consent before admitting liability. Failure can entitle the insurer to decline.

The cost of rebuilding or replacing damaged property with new equivalent items without deduction for depreciation. Policies may offer reinstatement cover as an alternative to indemnity value.

The residual value of damaged property or cargo after a loss, which the insurer may sell to reduce the claim. Salvage rights and costs are shared between insurer and insured.

A partial loss of a marine venture borne by the owner of the damaged cargo or ship alone, not shared across all parties. It is distinct from general average, which is deliberately sacrificed for the common safety.

A marine principle under which losses deliberately incurred to save a ship and cargo from a common peril are shared proportionately among all parties with a financial interest in the venture.

A marine or property loss where the subject matter is destroyed or so damaged that recovery is uneconomic. Actual total loss means the thing is gone; constructive total loss means recovery cost exceeds value.

Legal liability owed to someone other than the insured for injury, death, or property damage caused by the insured's acts. Liability policies indemnify such sums and related defence costs within the limit.

Failure to exercise the standard of care a reasonable person would in the circumstances, causing foreseeable harm. It requires a duty of care, breach, causation, and resulting damage.

The maximum sum an insurer will pay under a liability policy for any one claim or in the aggregate. It may apply per occurrence or per policy period and includes defence costs unless stated otherwise.

A premium reduction earned for each claim-free period, commonly applied in motor and household insurance. A claim usually resets or reduces the discount unless protected.

The consideration paid by the insured for insurance cover, calculated from the risk, expenses, and profit margin. Non-payment may allow the insurer to cancel the policy or refuse a claim.

The process of assessing a proposed risk and deciding whether to accept it, on what terms, and at what premium. It uses proposal information, medical or inspection evidence, and rating factors.

The number of deaths per thousand lives of a given age and sex in a defined period, used to price life cover. Life insurers build mortality tables from these rates to calculate premiums and reserves.

The frequency of illness or injury in a population over a period, used to price health and disability cover. It measures the incidence and duration of conditions that trigger benefit payments.

A specified time after policy inception or a medical event before benefits become payable. It controls anti-selection in health and disability policies and limits cover for pre-existing conditions.

A disease or injury the insured already had, or for which advice was sought, before cover began. Insurers may exclude, restrict, or apply a waiting period to such conditions.

The cash amount a policyholder receives on voluntarily terminating a whole-of-life or endowment policy before maturity. It reflects accumulated reserves less insurer expenses and charges.

A loan advanced by a life insurer against the surrender value of a participating or whole-of-life policy. Interest accrues, and any unpaid balance reduces the eventual death or maturity benefit.

The sum payable at the end of an endowment or term policy period if the insured survives to that date. It may include guaranteed benefits plus declared bonuses or dividends.

The transfer of part of an insurer's risk to another insurer, the reinsurer, to protect solvency and enable larger capacity. It may be proportional, such as quota share, or non-proportional, such as excess of loss.

The portion of a risk an insurer keeps for its own account after ceding the balance to reinsurers. It is set by underwriting capacity and capital, and may be per risk or per event.

The excess of an insurer's admissible assets over its liabilities and required capital, showing ability to meet obligations. Regulators set minimum margins and monitor them through returns and inspections.

Statutory oversight of insurers, brokers, and agents covering licensing, capital adequacy, market conduct, and policyholder protection. Its aims include insurer solvency, fair treatment, and market confidence.

A conduct principle requiring firms to deliver clear information, suitable products, fair pricing, and prompt claims handling throughout the customer relationship. Regulators use it to judge sales and service practices.

Due-diligence procedures requiring insurers and intermediaries to verify client identity, beneficial ownership, and source of funds. It supports anti-money-laundering controls and deters fraud and financial crime.

The process of assessing and paying a valid claim, from notification and evidence through loss adjustment to payment or repudiation. Prompt, fair settlement is a core customer-protection expectation.