CIIN Certificate CF3 key terms

A mutual duty on the insured and insurer to deal honestly and disclose material facts when arranging a contract. Breach by the insured can let the insurer avoid or reduce a claim.

A financial or legal stake in the subject matter such that the person benefits from its survival or suffers loss from its damage. It must exist at the time the contract is formed, and for indemnity covers at the time of loss.

The idea that a property or liability claim should restore the insured to the financial position held before the loss, no better and no worse. It underpins most general insurance and explains betterment and average.

Any information that would influence a prudent insurer's decision on whether to accept a risk, what premium to charge, or what terms to impose. The insured is expected to disclose such facts before cover begins.

Failure by the insured to reveal a material fact to the insurer when applying for cover or renewing it. Depending on the law and the insurer's remedy, it can lead to avoidance, reduced payout, or adjusted terms.

A false or misleading statement of fact made by the insured that induces the insurer to enter the contract. Remedies range from avoidance to proportionate reduction of a claim, depending on whether it was negligent, reckless, or deliberate.

The dominant, effective cause of a loss, as opposed to a remote or incidental factor. Determining it decides whether a peril is covered, excluded, or caught by an exception.

A specified event or risk, such as fire or theft, for which the policy promises to pay if it causes loss. Perils not listed are generally not covered unless an all-risks wording applies.

A policy provision that removes specified events, circumstances, or property from cover. Courts interpret ambiguous exclusions narrowly against the insurer that drafted them.

A policy term the insured promises to comply with exactly, such as maintaining a burglar alarm. Breach can entitle the insurer to reject a claim, so consumer law has narrowed the harshest effects.

A requirement the insured must satisfy before the insurer's liability arises, such as notifying a claim promptly or submitting proof of loss. Failure can let the insurer decline the claim.

A provision that reduces a claim in proportion to underinsurance when the sum insured is less than the value at risk. It applies to property covers where the insured must insure for full value.

The maximum amount the insurer will pay under a policy for a covered loss, or the limit used to calculate premium. It differs from the sum assured in life policies and from the policy limit in liability cover.

The first portion of any loss that the insured bears before the insurer pays, also called a deductible. It reduces small claims and lowers premium, and may be compulsory or voluntary.

The improvement in an insured's position when a claim payment replaces old property with new, leaving the insured better off than before the loss. Insurers may deduct for this to preserve indemnity.

Property left after a loss that still has value and may be sold, with proceeds reducing the claim. Insurers may take ownership of salvage when they pay a total loss.

The insurer's right, after paying a claim, to step into the insured's shoes and pursue recovery from a third party who caused the loss. It prevents the insured from recovering twice.

The principle that where several policies cover the same loss, each insurer pays its share and no insurer pays more than its rateable proportion. The insured cannot profit from overlapping cover.

Cover taken out with more than one insurer for the same risk, subject matter, and interest. It triggers contribution between insurers and may raise questions about the insured's intent.

Insurance bought by an insurer to transfer part of its risk to a reinsurer. It protects the insurer's solvency and capacity but does not change the original insured's rights under the policy.

The amount of risk an insurer or reinsured keeps for its own account rather than passing to reinsurers. It is set with capital, appetite, and profitability in mind.

An arrangement in which the reinsurer automatically accepts a defined class of risks that the insurer writes, under agreed terms. It contrasts with facultative reinsurance, which is negotiated risk by risk.

Reinsurance negotiated separately for an individual risk, with the reinsurer free to accept or decline. It suits large or unusual risks that fall outside a treaty.

The risk that an insured's behaviour becomes less careful, or that a claim is exaggerated or fabricated, because insurance exists. Insurers manage it through excesses, conditions, and claims investigation.

The process of assessing a proposed risk, deciding whether to accept it, and setting the premium and terms. It balances the insurer's appetite for risk against the need for a competitive price.

The core insurance mechanism of collecting premiums from many people exposed to similar risks so that the losses of the few are shared across the group. It relies on the law of large numbers.

The money an insured pays for cover. It reflects the expected cost of claims, expenses, and profit, and is adjusted for the risk profile of the insured.

A reduction in premium earned for each claim-free year, typically used in motor insurance. It rewards careful behaviour and is often protected for an extra charge.

A loss where the insured property is destroyed or damaged beyond economic repair. Insurers may settle as a constructive total loss where repair cost exceeds the insured value.

The process of assessing a reported claim, agreeing the amount payable, and paying it. It includes investigation, loss adjusting, and applying excesses, limits, and policy conditions.

An independent specialist appointed by an insurer to investigate large or complex claims and recommend a settlement. Adjusters work for the insurer, unlike loss assessors who act for the insured.

The insured's duty to tell the insurer about a loss within the period and in the manner the policy requires. Late or incomplete notice can prejudice cover or delay payment.

The situation where an insurer cannot meet its liabilities to policyholders. Regulation, capital requirements, and policyholder protection schemes aim to reduce the risk and cushion the impact.

Supervision of insurers' financial soundness, including capital, governance, and risk management, to protect policyholders. It sits alongside conduct regulation, which governs how firms treat customers.

Rules governing how insurers and intermediaries behave towards customers, covering advice, disclosure, complaints, and fair treatment. Breach can lead to fines, redress, or loss of authorisation.

The principle that firms must deliver fair outcomes for customers across product design, sales, claims, and after-sales service, not merely follow rules mechanically. Regulators test it through outcomes, not just processes.

Situations where an intermediary's or insurer's own interests could improperly influence the advice or service given to a customer. Firms must identify, manage, and disclose them.

A customer whose circumstances, such as health, age, bereavement, or low literacy, make them less able to understand or act in their own interests. Firms must adapt their processes to avoid harm.

The amount payable under a life policy on death or on a stated event, fixed at outset and not reduced for underinsurance. It is the life assurance equivalent of the sum insured.

Life cover that pays a lump sum only if the insured dies within a fixed period. It has no investment element and no payout if the insured survives the term.

Life cover that pays on death whenever it occurs, subject to premiums being maintained. It may have a surrender value and can be used for inheritance tax planning.

A life policy that pays a sum on a fixed maturity date or earlier death, combining protection with savings. It was historically used to repay mortgages.

A policy that pays a lump sum if the insured is diagnosed with a specified serious condition, such as cancer or a heart attack, and survives a survival period. It is often added to life cover.

Cover that replaces a proportion of earned income when the insured cannot work because of illness or injury. Payments start after a deferred period and continue while incapacity lasts.

A long-term income replacement policy that pays a regular benefit during incapacity from illness or injury, often to a chosen retirement age. It differs from short-term income protection in duration and terms.

The waiting time after incapacity begins before income protection benefits become payable. A longer deferred period lowers the premium and matches employer sick pay arrangements.

The amount a policyholder receives if they cash in a whole life or endowment policy before maturity. It may be less than premiums paid, especially in early years.

A life policy where the policyholder stops paying premiums but keeps a reduced sum assured in force. It avoids surrender and preserves some cover.

Brokers and agents must act honestly and in the client's best interests, disclosing material information and avoiding conflicts. Their duty of care can give rise to negligence claims if cover fails.

Telling a customer how much an intermediary is paid by the insurer for arranging cover. Transparency helps customers judge whether advice may be influenced by remuneration.