CIIN Certificate CF5 flashcards

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

Insurable interest

A legal or pecuniary relationship with the subject matter of insurance such that the insured gains from its preservation and suffers loss from its damage or destruction.

Utmost good faith

The mutual duty on insurer and insured to deal openly and disclose material facts; breach by the insured can make the contract voidable by the insurer.

Indemnity principle

The insured is restored to the financial position held immediately before the loss, no better and no worse, subject to sums insured and policy limits.

Subrogation

After paying a claim, the insurer acquires the insured's rights to recover the loss from a negligent third party so the insured cannot recover twice.

Contribution between insurers

Where two or more policies cover the same loss at the same level, each insurer pays its rateable share, preventing the insured from profiting.

Proximate cause

The dominant and effective cause of a loss, determined by a common-sense judgment; remote causes are disregarded when deciding whether a peril is covered.

Offer and acceptance

Two essential elements of a contract: the proposer offers terms and the insurer accepts, forming a binding agreement once consideration and intention are present.

Warranty in insurance

A promissory term that must be complied with exactly; breach discharges the insurer from liability for losses arising after the breach.

Fair presentation duty

Under the Insurance Act 2015, the insured must disclose material information and not misrepresent it, with proportionate remedies for breach.

Consumer disclosure rule

Under the 2012 Act, consumers need only take reasonable care to answer the insurer's questions accurately and are not required to volunteer information.

Contra proferentem

An interpretation rule that resolves genuine ambiguity in a policy wording against the party that drafted it, usually the insurer.

Term assurance

Life cover paying a stated sum if the insured dies within a fixed term; it has no investment value and pays nothing on survival.

Whole-of-life policy

Life cover providing a death benefit whenever death occurs, with premiums payable for life or a set period depending on product design.

Critical illness cover

Pays a lump sum when the insured is diagnosed with a defined condition meeting specified severity criteria, not a reimbursement of medical costs.

Morbidity risk

The risk of illness or injury leading to medical costs or loss of income, assessed in health and income-protection underwriting.

Lifetime annuity

A contract converting capital into guaranteed income for life, transferring longevity risk from the individual to the insurer.

Average clause

A condition reducing a claim in proportion to underinsurance, comparing the sum insured with the full value at risk at the time of loss.

Business interruption cover

Insurance responding to loss of gross profit or increased cost of working following an insured peril at the insured's premises.

Public liability insurance

Covers the insured's legal liability for bodily injury or property damage caused to third parties in connection with the business.

Claims-made policy

Liability cover responding to claims first made and notified during the policy period, regardless of when the incident occurred.

Reinstatement basis

A property settlement basis replacing damaged property with new equivalent items, often subject to a condition that the sum insured is adequate.

Pure risk

A risk with only loss or no-loss outcomes and no possibility of gain; it is generally the type of risk insurance is designed to cover.

Risk treatment options

The choices available after risk identification and measurement: avoid, reduce, retain, transfer and share the risk.

Moral hazard

A hazard arising from the insured's attitudes or dishonesty, where insurance may change behaviour and increase the likelihood of loss.

Loss ratio

Incurred losses divided by earned premium, expressed as a percentage; it measures claims cost relative to premium income.

Combined ratio

Loss ratio plus expense ratio; a figure above 100 percent indicates an underwriting loss on the portfolio.

Proportional reinsurance

A reinsurance arrangement where the reinsurer shares a fixed proportion of premiums and losses under the covered treaty or facultative contract.

First notification of loss

The initial report of a claim, capturing policy details, date, cause, circumstances and any third parties or injuries involved.

Reservation of rights

A letter preserving the insurer's position on cover while investigation continues; it is not a denial or acceptance of the claim.

Claims validation

Checking the claim against policy period, insured perils, exclusions, conditions precedent and limits before any settlement is considered.

Excess or deductible

The first amount of each loss that the insured bears, deducted from the claim settlement and often reducing premium.

Treating customers fairly

A conduct principle requiring clear communication, suitable products, prompt fair claims handling and accessible complaint resolution for customers.

Fraud indicators in claims

Warning signs such as late notification, inconsistent accounts, missing evidence or exaggerated damage that prompt closer investigation of a claim.