PCEIA key terms

A legal and financial stake in the subject matter of insurance such that the policyholder benefits from its survival or suffers loss from its damage. It must exist at the time of contracting, and for life policies at the time of claim.

The rule that a general insurance claim restores the insured to the same financial position as before the loss, no better and no worse. It does not apply to life or personal accident policies, which pay agreed sums.

The mutual duty on proposer and insurer to disclose all material facts relevant to the risk, without being asked. Breach may allow the insurer to avoid the contract, subject to statutory remedies for non-fraudulent non-disclosure.

Information that would influence a prudent insurer's decision on whether to accept the risk, what premium to charge, or what terms to impose. Examples include prior claims, hazardous occupations, and existing medical conditions.

Failure by the proposer to reveal a material fact the insurer needs to assess the risk. The insurer's remedy depends on whether the omission was deliberate, reckless, or innocent, and on the proportionality rules in force.

A statement of fact made during negotiations that is untrue or misleading. If material and relied upon by the insurer, it can make the contract voidable, with remedies ranging from proportional adjustment to avoidance for deliberate misstatements.

The remedy that treats an insurance contract as though it never existed, returning both parties to their pre-contract positions. Insurers commonly use it for fraudulent non-disclosure or misrepresentation, and premiums may be retained.

The dominant, effective cause of a loss, the one that sets the chain of events in motion without a new intervening cause. Policy coverage depends on whether this cause is insured, excluded, or excepted.

The insurer's right, after paying a claim, to stand in the insured's shoes and recover the loss from the party responsible. It supports indemnity and prevents the insured from recovering twice for the same loss.

The principle allowing an insurer that has paid a claim to recover a proportionate share from other insurers covering the same loss. It applies only to indemnity policies and requires common subject matter, peril, and interest.

A policy condition that reduces a claim in proportion to underinsurance, applying where the sum insured is less than the value at risk. For example, insuring a 200,000 property for 100,000 halves a partial loss payment.

The improvement in the insured's position when a claim payment replaces old property with new. Insurers may deduct for depreciation or require a contribution so the insured does not profit from the loss.

A policy provision that removes specified perils, property, or circumstances from cover, such as wear and tear, war, or intentional acts. Exclusions define the boundary of the insurer's promise and are read strictly against the insurer.

A policy term that must be satisfied before the insurer's liability arises, such as notifying a claim promptly or taking reasonable care to prevent loss. Breach can entitle the insurer to decline a claim.

A promise in the policy that something is or shall be done, or that a state of affairs exists. Under modern reform, breach no longer automatically discharges the insurer but suspends cover while the breach continues.

The risk that the insured's behaviour becomes less careful, or that a claim is exaggerated or contrived, because insurance exists. Insurers counter it with excesses, co-insurance, conditions, and claims investigation.

The amount the insured must bear before the insurer pays, applied per claim or per event. A voluntary deductible can lower the premium, while a compulsory one controls small claims and moral hazard.

The maximum amount the insurer will pay under a policy, whether an agreed sum for a life policy or a limit for property and liability cover. It should reflect replacement cost or the value at risk.

Cover that pays a stated sum if the life insured dies within a fixed period, with no payout if the period ends first. It provides pure protection at low cost and has no cash value.

Permanent cover for the whole of the life insured's lifetime, with a premium payable for life or a limited period. It typically builds cash value and pays a benefit whenever death occurs, subject to policy terms.

The savings element accumulated inside a permanent life policy, on which the insurer may pay interest and which supports loans and surrender. It is distinct from the death benefit and from the surrender value.

The amount an insurer pays if a permanent life policy is cancelled before maturity or death. It reflects accumulated cash value less surrender charges and may be nil in the early policy years.

A loan from the insurer secured against the cash value of a life policy. Interest accrues, and any unpaid balance plus interest is deducted from the death benefit or surrender value if not repaid.

The person or entity nominated to receive the policy proceeds on the death of the life insured. A valid nomination can direct payment outside the estate and should be kept up to date after life events.

A nomination made under insurance legislation that places policy proceeds in trust for the named beneficiary, so they bypass the deceased's estate and are protected from creditors. It requires proper written form.

The interval after a premium due date during which a life policy stays in force even though the premium is unpaid. If death occurs, the outstanding premium is usually deducted from the benefit.

The termination of cover because premiums were not paid within the allowed period. A lapsed permanent policy may retain a reduced paid-up benefit or surrender value depending on its non-forfeiture provisions.

The amount the policyholder pays for insurance cover, calculated from expected claims, expenses, and risk margins. It may be paid annually, monthly, or as a single premium, and non-payment can end cover.

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

The process by which an insurer assesses a proposed risk and decides whether to accept it, at what premium, and on what terms. It relies on proposal information, medical evidence, and claims history.

Setting aside funds to meet claims already reported but not yet settled, and claims incurred but not reported. Accurate reserving protects solvency and ensures policyholders' claims can be paid when due.

Losses that have occurred during the policy period but have not yet been notified to the insurer by the reporting date. They are estimated statistically and included in technical provisions.

The policyholder's duty to inform the insurer of a loss promptly and in the required form, supplying supporting documents. Late or defective notice can prejudice the claim where it causes real harm.

The excess of an insurer's admissible assets over its liabilities, required by regulators as a buffer against adverse experience. Falling below the minimum can trigger supervisory intervention or restrictions on new business.

The conduct standard requiring insurers and intermediaries to deliver fair outcomes across product design, sales, claims, and complaints. It focuses on outcomes rather than merely on disclosing terms in paperwork.

The process of collecting and verifying a client's identity, financial situation, and needs before advising or selling. It supports suitability of advice, anti-money-laundering compliance, and detection of fraud.

A statutory window after a policy is issued during which the policyholder may cancel and receive a refund of premium, less any cover already provided. It gives buyers time to reconsider the purchase.

The requirement that advice and product recommendations match the client's objectives, financial situation, risk tolerance, and needs. Advisers must gather adequate information and explain why a product is appropriate.

Assessing a client's willingness and capacity to bear investment and insurance risk, using questionnaires and discussion. The result guides asset allocation and product selection within a financial plan.

A structured review of a client's income, expenses, assets, liabilities, dependants, and goals to identify protection and savings gaps. It underpins recommendations for life, health, and general insurance cover.

A situation where an adviser's or firm's own interests, such as commission or sales targets, could improperly influence advice given to a client. It must be avoided, disclosed, and managed under conduct rules.