III IC-78 flashcards

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

Insurable interest

A legal and pecuniary relationship between the insured and the subject matter such that the insured benefits from its preservation and suffers loss from its destruction. Required at inception for life; at inception and at loss for property.

Utmost good faith

The mutual duty of insured and insurer to disclose all material facts relevant to the risk. Breach by non-disclosure or misrepresentation makes the contract voidable at the insurer's option.

Material fact

Any fact a prudent underwriter would consider relevant in deciding whether to accept a risk, and on what terms or premium. Examples include health history, occupation, prior claims and other insurance.

Principle of indemnity

The insured is restored to the same financial position as before the loss, neither better nor worse. It applies to property and liability insurance but not to life or personal accident benefit policies.

Proximate cause

The dominant, effective and efficient cause of a loss, without which the loss would not have occurred. Claims are judged on the proximate cause, not the remotest cause.

Subrogation

After paying an indemnity claim, the insurer acquires the insured's right to recover the loss from the third party responsible. It applies only to contracts of indemnity.

Contribution

The right of an insurer who has paid a claim to recover a proportionate share from other insurers covering the same interest, subject matter and peril. It requires identical coverage, not double recovery.

Average clause

Under-insurance penalty: claim payable equals loss multiplied by sum insured divided by value at risk. It applies where the sum insured is less than the actual value of the property.

Reinstatement value

The cost of replacing or rebuilding damaged property with new material of like kind and quality, without deduction for depreciation. It is usually subject to a condition that reinstatement actually occurs.

Salvage

The residual value of damaged property after a total or partial loss. The insurer is entitled to salvage, and its value is deducted from the claim settlement amount.

Warranty

A policy condition that must be strictly complied with; breach discharges the insurer's liability from the date of breach, regardless of whether the breach caused the loss.

Void versus voidable

A void contract has no legal effect from the start and cannot be enforced. A voidable contract is valid until the aggrieved party elects to rescind it.

Facultative reinsurance

Reinsurance of a single risk offered and accepted case by case. The reinsurer may decline any risk, and the insurer retains full liability to the original policyholder.

Treaty reinsurance

A standing agreement under which the reinsurer automatically accepts all risks falling within defined classes and limits. It obliges both parties to cede and accept such risks.

Quota share treaty

A proportional reinsurance arrangement in which the reinsurer takes a fixed percentage of every risk, premium and loss within the treaty scope.

Surplus treaty

A proportional reinsurance arrangement in which the insurer retains a fixed amount (line) per risk and cedes the excess up to a stated number of lines.

Excess of loss

A non-proportional reinsurance cover in which the reinsurer pays losses above a stated retention, up to a limit, for each loss occurrence or event.

Retrocession

Reinsurance purchased by a reinsurer to protect its own assumed portfolio. It transfers part of the reinsurer's risk to another reinsurer.

Coinsurance

Two or more insurers each accept a stated share of the same risk under one policy, each bearing its share of loss. It differs from reinsurance, which is not disclosed to the insured.

Deductible or excess

The first amount of each loss borne by the insured before the insurer pays. It reduces premium and eliminates small claims and administrative cost.

No-claim bonus

A premium discount granted in motor and some other policies when no claim is made during the preceding policy year. It is forfeited or reduced on claim.

IRDAI

The Insurance Regulatory and Development Authority of India, established under the IRDA Act 1999. It licenses insurers and intermediaries, registers products, and protects policyholders.

Insurance Ombudsman

A quasi-judicial authority for complaints against insurers, with a monetary award limit of INR 30 lakh. A complaint must be made within one year of the insurer's rejection.

Solvency margin

The excess of admissible assets over liabilities, expressed as a ratio of required solvency. IRDAI prescribes a minimum control level, currently 150 percent of the required margin.

Mathematical reserve

The actuarial liability of a life insurer for future policy benefits, calculated as the present value of future claims less future premiums. It is a balance-sheet liability.

Mortality, interest, expenses

The three components of a life insurance premium. Mortality covers expected death claims, interest is the assumed investment return, and expenses are loading for costs.

Bonus in participating policies

A share of surplus distributed to with-profit policyholders, declared periodically as simple reversionary bonus, compound reversionary bonus, or terminal bonus on maturity or death.

Insurable interest in life

A presumed or proven interest in the continued life of the insured. It must exist at inception of the policy, not at the time of the claim.

KYC and anti-money laundering

Know Your Customer procedures verify the identity and source of funds of prospects. They are mandatory under IRDAI anti-money-laundering rules for insurers and intermediaries.

Rebating prohibition

Insurers and agents may not offer any inducement or share of commission to secure business. Rebating is a breach of the Insurance Act and IRDAI regulations, attracting penalties.

Proposal form

The written application containing the proposer's declaration and disclosures. It forms the basis of the contract and is the primary underwriting document.

Surveyor's role

An independent licensed surveyor assesses and reports on general insurance claims above the prescribed threshold, establishing cause, extent and amount of loss for settlement.