General (Non-Life) Insurance Practice
What the exam tests
General (Non-Life) Insurance Practice covers property, motor, liability, marine, and health lines, plus underwriting, rating, policy wording, and claims.
Core rules
- Sum insured vs limit: property policies usually insure a value; liability policies usually state a limit per occurrence or aggregate.
- Excess/deductible: the first amount of each loss borne by the insured.
- Average clause: if property is underinsured, the claim is reduced proportionately: (sum insured / value at risk) × loss.
- Warranties and conditions: a breach may allow the insurer to deny a claim, depending on whether the term is a warranty, condition precedent, or mere representation.
- Reinsurance: facultative covers a single risk; treaty covers a class of risks automatically.
Worked example
A factory is worth $250,000 but insured for $200,000. Fire causes $100,000 damage. The policy has a $2,000 excess and an average clause. The insurer pays (200,000 / 250,000) × 100,000 = $80,000, less the $2,000 excess = $78,000. The insured bears $22,000: $20,000 from underinsurance and $2,000 excess. Without the average clause, the insurer might pay $98,000, which is why the clause matters.
Traps
- Confusing market value, reinstatement value, and indemnity value.
- Assuming the excess is always deducted before average is applied.
- Treating every policy term as a condition precedent.