III IC-84 key terms

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

The rule that a property or liability claim payment should restore the insured to roughly the same financial position as before the loss, no better and no worse, subject to policy limits, deductibles and sums insured.

The mutual duty on proposer and insurer to deal honestly and disclose material facts relevant to the risk, so that the contract is not based on concealment or misrepresentation. Breach may allow the insurer to avoid or adjust the contract.

Information that would influence a prudent insurer's decision on whether to accept a risk, or on the terms and premium charged. Examples include prior claims, hazardous activities and previous declinatures.

Failure by a proposer to reveal a material fact that the insurer needed, whether deliberately or through oversight. Remedies range from avoidance of the contract to proportionate adjustment of the claim, depending on the jurisdiction and the proposer's state of mind.

The dominant, effective cause of a loss, the one that sets the chain of events in motion without interruption by a new and independent cause. Policy coverage is usually determined by this cause rather than by the last event.

A specific event or circumstance that can cause loss, such as fire, flood, theft or collision. Policies list covered perils, either by naming them or by granting all-risks cover with exclusions.

A condition that increases the likelihood or severity of a loss arising from a peril, for example poor housekeeping, steep terrain or a history of reckless driving. Hazards are physical, moral or morale in nature.

The tendency of an insured to behave dishonestly or carelessly because insurance exists, such as exaggerating a claim or arranging a loss deliberately. Insurers counter it through deductibles, claims investigation and policy conditions.

The amount of each loss that the insured must bear before the insurer pays, expressed as a fixed sum or a percentage of the claim. It reduces small claims and gives the insured a reason to prevent losses.

A condition applied to underinsured property risks that reduces the claim in the same proportion as the sum insured bears to the value at risk. It prevents an insured who bought too little cover from recovering in full.

The maximum amount the insurer will pay under a policy for a defined insured interest, stated in the schedule. It may be a fixed limit, a reinstatement value or an aggregate figure for the policy period.

A clause that removes specified perils, property, persons or circumstances from the cover granted. Exclusions are read strictly against the insurer and must be clear enough for the insured to understand the gap in protection.

A policy term that the insured promises to fulfil or a state of affairs the insured confirms, such as fitting an approved alarm. Breach may entitle the insurer to refuse a related claim, depending on the wording and applicable law.

A term of the policy that sets out obligations on the insured or the insurer, such as paying premium, notifying claims or submitting to loss adjustment. Breach of a condition can affect the insurer's liability.

The transfer by an insurer of part of the risk it has accepted to another insurer, the reinsurer, in exchange for a share of premium. It protects the ceding insurer's solvency and capacity rather than the original insured directly.

The amount of risk an insurer or reinsured keeps for its own account before passing the remainder to reinsurers. It is set by capital, appetite and the cost of reinsurance cover.

The deliberate or unavoidable acceptance of loss exposure by an individual or organisation instead of transferring it to an insurer. It may be planned through a captive or deductible, or unplanned through ignorance.

An arrangement in which two or more insurers each accept a stated percentage of the same risk under one set of terms, often led by a lead insurer. Each insurer pays its share of a loss directly to the insured.

The consideration the insured pays for cover, calculated from the rate applied to the exposure base and adjusted for loadings, discounts, taxes and fees. It is the insurer's main source of income for paying claims.

The process of setting a premium for a risk using factors such as exposure, claims history, hazard and expenses. It may be manual, experience-based or individually negotiated for large or unusual risks.

The assessment and selection of risks by an insurer, deciding whether to accept a proposal and on what terms, limits and premium. It balances the appetite for growth against the need for a profitable, well-spread portfolio.

An addition to the standard premium to reflect above-average risk, such as a poor claims record, hazardous occupation or impaired health. It may be expressed as a flat amount, a percentage or an extra rating factor.

The maximum amount an insurer will pay under a policy or a section of it, whether for any one occurrence, in aggregate or for a specific cover. It caps liability and shapes the premium charged.

The insured's obligation to inform the insurer promptly of a loss or circumstance that may give rise to a claim, using the method and timeframe set out in the policy. Late notice can prejudice cover.

An independent specialist appointed by the insurer to investigate the cause and extent of a claim, verify cover and recommend settlement. Adjusters may be staff or external and act for the insurer, not the insured.

The residual value of damaged property that remains after a loss, which the insurer may sell to reduce the net claim paid. The insured is not allowed to profit from both the claim and the salvage.

The insurer's right, after paying a claim, to stand in the insured's shoes and pursue recovery from the party responsible for the loss. It supports the indemnity principle by preventing double recovery.

A written notice by which an insurer confirms it will handle a claim while keeping open the question of whether cover applies. It protects the insurer from waiving a defence by investigating or paying early.

Deliberate deception to obtain a benefit, such as staging a loss, inflating a claim or withholding material facts. Insurers respond with investigation, claim refusal, policy avoidance and, where appropriate, referral to authorities.

A person or firm that arranges, advises on or sells insurance on behalf of an insurer or a client, including agents, brokers and bancassurance staff. Intermediaries must be authorised and disclose their status and remuneration.

An intermediary who acts for the client in placing insurance, advising on needs and negotiating terms with insurers. A broker owes duties of care and disclosure to the client rather than to the insurer.

An intermediary appointed to act for an insurer or, in some markets, for the client, with authority to solicit business and bind cover within agreed limits. The principal is generally liable for the agent's acts within authority.

The requirement to tell a client how much remuneration the intermediary receives from the insurer for placing the business, and any other inducements. It supports transparency and helps clients judge conflicts of interest.

A conduct standard requiring firms to deliver clear information, suitable advice, fair treatment and accessible complaints processes throughout the product lifecycle. Regulators test it through outcomes rather than mere policy documents.

The requirement that advice or a sale match the client's needs, objectives, financial situation and attitude to risk, based on adequate fact-finding. Unsuitable sales can trigger redress, sanctions and reputational damage.

A conduct standard requiring firms to deliver clear information, suitable advice, fair treatment and accessible complaints processes throughout the product lifecycle. Regulators test it through outcomes rather than mere policy documents.

The documented process by which a firm records, investigates and resolves customer complaints within set timeframes, with escalation to an ombudsman or regulator. Good handling identifies root causes and prevents recurrence.

The excess of an insurer's admissible assets over its liabilities, required by regulation to absorb unexpected losses and protect policyholders. It is often expressed as a ratio or a prescribed minimum capital level.

The regulatory assessment that an insurer holds enough capital for the risks it runs, including underwriting, market, credit and operational risk. Rules may use standard formulas or internal models approved by the supervisor.

The due diligence process of identifying clients, verifying their identity and understanding their business and source of funds. It is a core anti-money-laundering control in insurance distribution and claims payment.

Laws and procedures designed to prevent criminals from disguising the proceeds of crime through financial products, including certain life and investment insurance. Firms must monitor, report suspicious activity and keep records.

The regulation of how insurers and intermediaries behave towards customers, covering sales, disclosure, claims and complaints. Supervisors use thematic reviews, mystery shopping and sanctions to enforce fair outcomes.