FRC Insurance Agent Licensing Examination key terms

A principle requiring both the applicant and the insurer to deal honestly and disclose all material facts relevant to the risk, so neither party gains advantage through concealment or silence.

A financial or legal stake in the subject matter of insurance such that the policyholder benefits from its preservation and suffers measurable loss from its damage, destruction, or the insured event occurring.

The rule that a non-life claim payment should restore the insured to approximately the financial position held before the loss, no better and no worse, preventing profit from insurance.

An improvement in the condition or value of damaged property arising from repair or replacement with new materials, which the insurer may deduct from the settlement so the insured does not profit.

Any information that would influence a prudent insurer's decision to accept a risk or to set the premium and terms, including prior claims, health conditions, occupations, and hazardous activities.

The failure by an applicant or policyholder to reveal a material fact when proposing for insurance or when renewing, which may entitle the insurer to avoid the contract or reduce a claim.

A false or misleading statement made by an applicant or the insurer during negotiations, whether innocent, negligent, or deliberate, that induces the other party to enter the contract on those terms.

The dominant, effective, and operative cause of a loss in an unbroken chain of events, used to decide whether the peril is covered under the policy.

A specific event or circumstance, such as fire, theft, illness, or death, that is listed in the policy as covered and that triggers the insurer's obligation to pay.

A policy provision that removes specified perils, circumstances, property, or persons from cover, so that loss arising from those causes is not payable even if the general wording might otherwise apply.

A policy term that the insured promises to satisfy exactly, such as a security requirement; breach may allow the insurer to deny a claim or treat the contract as discharged.

A contractual requirement that must be fulfilled before the insurer's liability arises, for example paying the premium or notifying a claim promptly.

The insured's obligation, at proposal and renewal, to volunteer material information without being asked, because the insurer cannot inspect the risk directly and relies on the applicant's candour.

The amount the policyholder pays, usually in instalments or a single sum, in exchange for the insurer accepting the risk and providing cover for the policy period.

The maximum amount the insurer will pay under the policy for a covered loss, which may be the value of the property, a stated limit, or a benefit amount.

A situation where the sum insured is less than the actual value of the insured property, so that any claim settlement is reduced in proportion to the shortfall.

A policy condition applying to property insurance that reduces a partial-loss payment in the same proportion as the sum insured bears to the full value of the property at the time of loss.

The amount of each loss that the insured must bear before the insurer pays, which reduces the premium and discourages small or frivolous claims.

A sum deducted from a claim settlement, either compulsory under the policy or voluntarily accepted by the insured in return for a lower premium.

Insurance purchased by an insurer to transfer part of the risk it has accepted to another insurer, protecting its solvency and enabling it to write larger or more concentrated risks.

The portion of risk that an insurer keeps on its own books rather than ceding to a reinsurer, determined by its capital, appetite, and regulatory limits.

The excess of an insurer's admissible assets over its liabilities, required by the regulator as a buffer so that policyholder claims can be met in adverse conditions.

The requirement that an insurer hold sufficient capital relative to the risks it underwrites, assessed through regulatory ratios and stress scenarios, to remain able to pay claims.

A supervisory approach that sets minimum capital according to the types and levels of risk an insurer bears, such as underwriting, market, credit, and operational risk, rather than a flat amount.

Supervision aimed at the financial soundness of insurers, covering capital, reserves, investments, governance, and reporting, so that promises to policyholders can be honoured.

Supervision of how insurers and intermediaries treat customers, covering fair dealing, disclosure, suitability, complaints, and sales practices, rather than financial strength alone.

A regulatory principle requiring firms to embed fair treatment of customers in culture, product design, sales, and claims, delivering outcomes that are appropriate and transparent.

The requirement that a recommended product matches the customer's needs, objectives, financial situation, and risk tolerance, supported by documented fact-finding and advice.

The structured process of gathering a customer's personal, financial, and insurance information so that advice and product recommendations are based on accurate and complete data.

The identification and verification procedures an insurer or intermediary must perform to establish who the customer is, their business, and the source of their funds.

Ongoing checks on a customer's identity, transactions, and risk profile, including enhanced measures for higher-risk relationships and periodic review of the file.

The natural person who ultimately owns or controls a customer or the funds involved, even where another entity or nominee appears as the legal holder.

An individual entrusted with prominent public functions, or a close associate or family member, whose accounts present higher money-laundering risk and require enhanced due diligence.

Additional identity, source-of-wealth, and transaction scrutiny applied to higher-risk customers, such as politically exposed persons or those in high-risk jurisdictions.

A confidential report filed with the financial intelligence unit when an insurer or intermediary suspects funds are the proceeds of crime or linked to terrorist financing.

Disclosing to a customer or third party that a suspicious transaction report has been made or that an investigation is under way, which is itself an offence.

The process of concealing the criminal origin of funds through placement, layering, and integration so that they appear to come from legitimate sources.

The continuing obligation on the insured to correct information and disclose changes in risk during the policy period, particularly where the policy requires notification of material changes.

The insured's prompt communication to the insurer of a loss or circumstance that may give rise to a claim, allowing investigation, mitigation, and reserve setting.

An independent specialist appointed by the insurer to investigate a claim, establish the cause and amount of loss, and recommend a settlement in line with policy terms.