AAii 306 Motor Insurance key terms

A legal right to insure arising from a financial relationship with the subject matter, where the insured benefits from its safety and suffers loss from its damage. Required at inception and at time of loss for motor insurance.

The principle that insurance restores the insured to their pre-loss financial position, no better or worse. In motor insurance, claims are settled by repair, replacement, or cash payment up to the sum insured or market value.

A duty on both insured and insurer to disclose all material facts and avoid misrepresentation. Breach by the insured can allow the insurer to avoid the policy or reduce a claim proportionately under consumer protection rules.

Any information that would influence a prudent insurer's decision to accept a risk or set its terms. Examples include motoring convictions, modifications, and regular drivers not named on the proposal.

Failure by the insured to reveal a material fact when applying for or renewing cover. Depending on the insurer's remedy and consumer rules, it may lead to claim reduction, policy cancellation, or avoidance.

The improvement in a vehicle's condition from repairs using new parts, which can unjustly enrich the insured. Insurers may deduct an amount for betterment so the settlement reflects the pre-loss value.

The legal minimum motor insurance required to drive on public roads, typically covering third-party bodily injury and property damage. In the UK, the Road Traffic Act 1988 sets these requirements and penalties for non-compliance.

The lowest level of motor cover, paying for damage or injury the insured causes to others but not for the insured's own vehicle. It satisfies compulsory insurance requirements but offers no own-damage protection.

A policy level that includes third-party liability plus accidental damage to the insured vehicle, often with additional benefits such as fire, theft, and windscreen cover. It is the broadest common private car cover.

A body funded by insurers that compensates victims of uninsured or untraced drivers. It ensures injured parties can recover damages where the at-fault driver lacks valid insurance or cannot be identified.

An independent dispute-resolution body for complaints about financial services, including motor insurance. It can award compensation and its decisions are binding on the insurer if the consumer accepts them.

The UK regulator responsible for the prudential supervision of insurers, ensuring they hold sufficient capital and are managed safely. It works alongside the FCA, which regulates conduct.

The UK regulator that oversees conduct in financial services, including motor insurance sales and claims. It enforces rules such as Treating Customers Fairly and the Consumer Duty.

Loss or damage to the insured vehicle itself, covered under comprehensive or third-party, fire and theft policies. It excludes damage caused by the insured to third parties, which falls under liability cover.

Unexpected and unintended physical damage to the insured vehicle, such as collision or impact with an object. It is typically covered under comprehensive policies, subject to excess and exclusions.

The first amount of a claim that the insured must pay, reducing the insurer's liability. It can be compulsory (set by the insurer) or voluntary (chosen by the insured for a premium discount).

A premium reduction earned for each claim-free year, rewarding safe driving. It is usually lost or reduced after an at-fault claim and may be protected for an extra premium.

A policy benefit that pays to repair or replace broken glass, often with a lower excess and without affecting the no-claims discount. It may be limited to a specified amount.

A temporary replacement vehicle provided while the insured's car is being repaired after a claim. Availability and duration depend on the policy and repairer arrangements.

A single motor policy covering multiple vehicles under one schedule, often with aggregated limits and premiums. It suits businesses with several vehicles and may include claims experience rating.

Insurance for businesses that sell, repair, or service vehicles, covering road risks, premises, and customer vehicles. It differs from private car cover by addressing trade activities and liabilities.

A motor trade policy section covering liability and damage while driving customer or trade vehicles on the road. It may be limited to named drivers and specific vehicle types.

A motor policy extension or class covering vehicles used for hire or reward, such as taxis or delivery work. Standard private car policies exclude this use unless specifically included.

A policy condition restricting how the vehicle may be used, for example social, domestic, and pleasure only, or including commuting. Using the vehicle outside these terms can invalidate cover.

A policy clause that removes specified risks or circumstances from cover, such as driving without a licence or using a vehicle for racing. Exclusions define the boundaries of the insurer's liability.

A policy condition that must be satisfied before the insurer's liability arises, such as maintaining a roadworthy vehicle or notifying claims promptly. Breach can entitle the insurer to decline a claim.

A policy promise that must be complied with exactly, such as keeping the vehicle locked in a garage. Breach may discharge the insurer from liability, though consumer rules may modify this.

A characteristic used by insurers to price risk, including age, vehicle group, location, claims history, and annual mileage. Each factor is weighted to estimate the likelihood and cost of claims.

Technology that records driving behaviour, such as speed and braking, to price insurance or provide feedback. It enables usage-based policies and can reward safer driving with lower premiums.

A pricing model where premiums depend on how, where, and how much a vehicle is driven, often using telematics data. It aligns cost with actual risk rather than traditional proxies like age.

The process of resolving a claim by repair, replacement, or cash payment, including assessment of liability and quantum. It aims to indemnify the insured promptly and fairly.

The insurer's right to recover claim costs from a third party who caused the loss, after indemnifying the insured. It prevents the insured from recovering twice and shifts costs to the responsible party.

The insured's legal responsibility to compensate others for injury or property damage caused by their vehicle. Motor policies cover this liability up to specified limits.

An arrangement where insurers each pay for their own insured's damage after a collision, waiving subrogation against each other. It simplifies claims but does not affect the insured's no-claims discount.

A legal document summarising the policy, including insured persons, vehicle, cover level, and period. It must be produced for police or court and is evidence of compulsory cover.

A personalised document listing the insured's details, vehicle, cover, excesses, and endorsements. It forms part of the contract and should be checked for accuracy at inception and renewal.

A regulatory principle requiring insurers to deliver fair outcomes for customers throughout the product lifecycle. It covers clear communication, suitable products, and fair claims handling.

An FCA rule requiring firms to act to deliver good outcomes for retail customers, including fair value and clear communications. It applies to motor insurance products and services.

Situations where an insurer's or intermediary's interests could improperly influence advice or claims decisions. Firms must identify and manage them to ensure customer interests are protected.