III IC-83 flashcards

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

Pure risk

A risk with only two outcomes, loss or no loss, and no possibility of gain. It is the type of risk insurance is designed to transfer.

Speculative risk

A risk involving the chance of gain as well as loss, such as investing or launching a product. It is generally not insurable.

Insurable interest

A financial stake in the subject matter such that loss would cause the insured a measurable economic detriment. It must exist when the policy starts or when the loss occurs, depending on cover type.

Utmost good faith

The mutual duty of insured and insurer to disclose all material facts. A fact is material if it would influence an underwriter's decision to accept or rate the risk.

Proximate cause

The dominant and effective cause of a loss, without which the loss would not have occurred. Remote causes do not trigger cover unless the wording states otherwise.

Indemnity principle

Insurance restores the insured to the financial position held before the loss, never better. Valued policies and replacement-cost cover are recognised exceptions.

Moral hazard

The risk that an insured acts dishonestly, for example by exaggerating a claim or staging a loss. It is a behaviour-based hazard distinct from physical conditions.

Morale hazard

Carelessness or indifference created by the existence of insurance, such as leaving a door unlocked. It raises expected loss frequency without any dishonest intent.

Coinsurance clause

A property clause requiring the insured to carry a stated percentage of value. If underinsured, the insured shares the loss in proportion to the shortfall.

Subrogation

The insurer's right, after paying a claim, to pursue the at-fault party in the insured's name. It prevents double recovery and allocates loss to the responsible party.

Aggregate limit

The maximum the insurer will pay across all covered losses in a policy period. It caps total exposure and is usually lower than the sum of per-occurrence limits.

Reinstatement clause

A provision restoring the policy limit after a loss, either automatically, pro rata, or on payment of additional premium. It determines whether cover remains available.

Actual cash value

The value of damaged property calculated as replacement cost less depreciation, or market value where the wording specifies. It is the common default valuation basis.

Proof of loss

A sworn statement by the insured setting out the amount and circumstances of a claim. Failure to file it can bar recovery where the insurer is prejudiced.

Reservation of rights

A written notice preserving the insurer's right to deny coverage later while it investigates. It is not a denial and does not waive any coverage defence.

Betterment

The improvement in an insured's position when a new item replaces an old one. Insurers deduct it to avoid paying more than the loss sustained.

Business interruption

Cover for lost net profit and continuing expenses during the period of indemnity after an insured peril stops the business. Savings and alternative revenue are deducted.

Binder

Temporary evidence of insurance issued before the policy is formally written. It carries the same terms as the policy it anticipates.

Warranty

A promise by the insured that a stated fact is true. Breach can allow the insurer to avoid the contract, depending on the jurisdiction and materiality rules.

Waiver and estoppel

Waiver is voluntary surrender of a known right. Estoppel prevents a party from asserting a right after conduct led another party to rely on it to their detriment.

Aleatory contract

A contract in which the parties exchange unequal values depending on chance. Insurance premiums are paid in exchange for a contingent promise to pay claims.

Contract of adhesion

An agreement drafted by one party and accepted or rejected by the other. Ambiguities are construed against the drafter, usually the insurer.

Short-rate cancellation

Cancellation by the insured mid-term with a refund smaller than pro rata. The insurer keeps a penalty for the early termination.

Solvency capital requirement

The capital a regulated insurer must hold to absorb adverse events at a defined confidence level. It is risk-based and separate from minimum capital.

Customer due diligence

The identification and verification of customers and beneficial owners, plus ongoing monitoring, required under anti-money-laundering rules.

Market conduct regulation

Rules governing how insurers treat customers, covering disclosure, advertising, complaints, and claims handling. Breach can lead to fines and remediation.

Combined ratio

The loss ratio plus the expense ratio, expressed as a percentage. A figure below 100% indicates an underwriting profit before investment income.

IBNR reserves

Incurred but not reported reserves estimate claims that have occurred but not yet been notified. They are a core part of technical provisions.

Earned premium

The portion of written premium that corresponds to cover already provided. The remaining unearned portion is a liability until the policy period elapses.

Quota share reinsurance

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

Demands and needs statement

A disclosure recording the customer's requirements and the reasons a recommended product meets them. It supports suitability and fair treatment outcomes.

Claims-made policy

Cover triggered when a claim is made during the policy period, regardless of when the act occurred, subject to any retroactive date and extended reporting period.