AAii 306 Motor Insurance flashcards

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

Utmost good faith

A duty on the proposer to disclose all material facts that a prudent insurer would consider when deciding whether to accept the risk and on what terms.

Indemnity principle

The insurer restores the insured to their pre-loss financial position, subject to policy limits, sums insured and excesses; the insured cannot profit from a loss.

Insurable interest

A financial interest in the subject matter of insurance such that the insured benefits from its preservation or suffers loss from its damage; required at the time of loss.

Proximate cause

The dominant, effective cause of a loss that determines whether cover applies; it is the nearest efficient cause in a chain of events, not necessarily the last event.

Subrogation

The insurer's right, after indemnifying the insured, to recover the loss from the third party responsible; recovery cannot exceed the amount paid and is subject to the insured's prior recovery.

Contribution

The principle that where two or more policies cover the same loss, the insurers share the cost proportionately or in accordance with a rateable proportion clause.

Compulsory third-party liability

Statutory motor insurance requirement covering bodily injury (and in some markets property damage) caused to third parties; a certificate of insurance is evidence of cover.

Motor insurance bureau

An organisation that compensates victims of uninsured or untraced drivers, subject to statutory limits and conditions; funded by insurers.

Solvency regulation

Rules requiring insurers to hold sufficient capital against underwriting, market and operational risks; motor liability may attract higher capital due to long-tail claims.

Consumer Duty

A conduct regulation requiring firms to act in good faith, avoid foreseeable harm and enable customers to pursue their financial objectives, with outcomes monitored.

Insurance distribution disclosure

Rules requiring intermediaries to disclose their status (agent or broker), remuneration and conflicts of interest before the contract is concluded.

Policy schedule

The document that personalises the policy, showing the insured, vehicle, cover, limits, excesses and premium; it prevails over the policy wording where they conflict.

Comprehensive cover

Own-damage cover for accidental damage, fire and theft, plus third-party liability; the widest private car cover, subject to exclusions and excesses.

Third party, fire and theft

A cover level providing third-party liability plus damage to the insured vehicle caused by fire or theft, but not accidental damage.

Excess

The amount the insured must pay towards a claim; compulsory excess is set by the insurer, voluntary excess reduces premium, and young-driver excess may be added.

No-claim discount

A premium reduction for claim-free years, usually stepped and forfeited or reduced on an at-fault claim; it can be protected for an additional premium.

Windscreen cover

A separate cover limit for windscreen repair or replacement, often with a lower or nil excess; repair is encouraged to reduce cost.

Fleet policy

A motor policy covering multiple vehicles under one policy with a single renewal date, often rated on fleet claims experience and vehicle mix.

Motor trade policy

Cover for businesses dealing in vehicles, such as sale, repair or valeting; it includes road risks, premises risks and combined risks, unlike a fleet policy.

Hired-in vehicle

A vehicle hired or borrowed by the insured; fleet policies may cover it, and the policy should state whether cover is comprehensive or third-party only.

Goods in transit

Cover for goods being transported; it is not provided by a motor policy and requires separate commercial property or goods-in-transit insurance.

Condition precedent to liability

A policy condition that the insured must satisfy before the insurer is liable, such as notifying claims promptly and cooperating with the insurer; breach may entitle the insurer to decline.

Reasonable precautions condition

A condition requiring the insured to take reasonable steps to avoid loss; it does not demand extraordinary measures, but gross carelessness may breach it.

Endorsement

A document that modifies the policy, imposing additional conditions or exclusions, such as a young-driver exclusion or immobiliser requirement; read with the policy.

Average clause

A clause reducing claims proportionately where the sum insured is less than the value at risk; it applies to some commercial property but rarely to motor own-damage cover.

Insurance group

A rating category reflecting vehicle repair cost, performance, security and theft attractiveness; higher groups attract higher premiums.

Telematics insurance

Usage-based insurance using driving data such as mileage, speed, braking and time of day to price risk; data protection and consent are required.

Moral hazard

A risk arising from the insured's deliberate behaviour, such as fraud or exaggeration, which may lead to declinature or higher excess.

First notification of loss

The initial report of a claim; the insurer should acknowledge promptly, investigate, assess liability and keep the insured informed of progress.

Contributory negligence

A reduction in the claimant's damages where their own negligence contributed to the loss; liability may be apportioned between the parties.

Total loss settlement

Settlement of a vehicle damage claim on a total-loss basis, considering pre-accident market value, salvage and excess; agreed-value policies use the agreed sum.

Statement of fact

A document recording information provided by the customer; the customer must check and confirm its accuracy before cover is bound.

Certificate of insurance

Statutory evidence of motor insurance containing required particulars; it must be issued in the prescribed form and provided to the insured.

Treating Customers Fairly

A conduct principle requiring fair treatment, clear information, suitable advice, fair claims handling and no post-sale barriers.

Vulnerable customer

A customer whose circumstances (health, financial resilience, bereavement) may require additional support; firms must identify and assist them.