CIIN Certificate CF3 flashcards

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

Insurable interest

A legal or financial relationship whereby the policyholder benefits from the continued existence of the insured subject and suffers loss if the insured event occurs. Required at inception for life cover.

Utmost good faith

The principle that both insurer and insured must disclose all material facts relevant to the risk. Breach by the insured can make the policy voidable and affect claims.

Principle of indemnity

The insured is restored to the same financial position as before the loss, neither better nor worse. It does not apply to life assurance or fixed personal accident benefits.

Subrogation

After settling a claim, the insurer acquires the insured's legal right to recover the loss from the responsible third party. Recovery cannot exceed the amount paid.

Average clause

Where the sum insured is less than the value at risk, the claim is reduced proportionally: settlement equals sum insured divided by value at risk, multiplied by the loss.

Proximate cause

The dominant, effective cause of a loss, as opposed to the last event in the chain. Cover depends on whether this cause is insured or excluded.

Warranty in insurance

A policy term that must be complied with exactly. Breach allows the insurer to repudiate the claim regardless of whether the breach caused the loss.

Condition precedent

A requirement the insured must satisfy before cover attaches or before a claim becomes payable, such as notifying a claim within a stated period.

Contra proferentem

The rule that ambiguous wording in a contract is interpreted against the party who drafted it, typically the insurer, favouring the insured's reasonable reading.

Misrepresentation

A false statement of fact made before the contract. Remedies range from avoidance to proportionate reduction of claim or damages, depending on whether it was innocent, negligent or fraudulent.

Cooling-off period

A statutory or regulatory window after policy inception during which a consumer may cancel and receive a refund of premium, subject to any claims made.

Claims-made policy

A liability policy responding to claims first made and notified during the policy period, regardless of when the incident occurred. Retroactive dates define how far back cover applies.

No-claim discount

A premium reduction earned for each claim-free year. It is usually forfeited or reduced following a fault claim and restored gradually over subsequent years.

Business interruption cover

Indemnifies lost gross profit and increased working costs following insured damage. The sum insured reflects gross profit and the indemnity period must cover reinstatement time.

Franchise versus excess

An excess deducts a fixed first amount from every claim; a franchise means the insurer pays nothing at all if the loss falls below the stated threshold.

Institute Cargo Clauses

Standard marine cargo wordings graded by breadth: A covers all risks, while B and C cover progressively narrower lists of named perils with stated exclusions.

Term assurance

Life cover paying a lump sum only if death occurs within a fixed period. It has no surrender or investment value and is the lowest-cost form of life protection.

Whole-of-life policy

Life cover that pays on death whenever it occurs, with no fixed expiry. Premiums may be guaranteed or reviewable, and some designs build a cash value.

Critical illness cover

Pays a lump sum when the insured is diagnosed with a listed condition that meets the policy's precise definition. It is not a reimbursement of medical expenses.

Annuity

A contract converting a lump sum into regular income. A lifetime annuity removes longevity risk for the individual but is normally irrevocable once purchased.

Moral versus morale hazard

Moral hazard is the risk of dishonest or exaggerated claims driven by intent; morale hazard is careless behaviour driven by indifference once insured. Both raise expected loss cost.

Facultative reinsurance

Reinsurance arranged individually for a single risk, with the reinsurer free to accept or decline each submission. Contrasts with treaty reinsurance, which covers a whole portfolio.

Excess of loss reinsurance

Non-proportional reinsurance under which the reinsurer pays losses above the cedant's retention, up to a stated limit, for each loss or event.

Risk retention

Deliberately keeping a risk rather than transferring it. Appropriate where losses are frequent but small, so predictable that handling them internally is cheaper than insuring.

Hazard versus peril

A peril is the actual cause of loss, such as fire or flood. A hazard is a condition that increases the likelihood or severity of that peril, such as faulty wiring.

Constructive total loss

A loss where the cost of repairing or recovering the insured property exceeds its insured value, allowing it to be treated as a total loss.

IBNR reserves

Incurred but not reported reserves set aside for claims that have occurred but have not yet been notified to the insurer, estimated using actuarial methods.

Salvage in claims

Damaged property taken over by the insurer after paying a total loss. Its residual value is deducted from the settlement to prevent the insured recovering twice.

Claims notification duty

The insured must inform the insurer promptly as required by the policy. Delayed notification may reduce or void cover where it prevents proper investigation.

Treating customers fairly

A conduct principle requiring fair outcomes in product design, sales, claims and complaints, assessed by results for customers rather than by disclosure alone.

Suitability of advice

The requirement that advice match the customer's needs, circumstances and risk appetite, supported by a documented record of the recommendation and its rationale.

Conflicts of interest

Situations where an adviser's or firm's interests may conflict with the customer's. They must be identified, disclosed and managed, including commission transparency.