Insurance Commission Licensure Exam - Non-Life cheat sheet

Risk is uncertainty about loss; pure risk (loss or no loss) is insurable, speculative risk (gain or loss) is not.

Insurable interest in non-life must exist at policy inception and at time of loss; property insurance requires pecuniary interest in the subject matter.

Indemnity restores the insured to pre-loss financial position, no better; valued policies and agreed-value clauses are exceptions.

Utmost good faith obliges both parties to disclose material facts; non-disclosure or misrepresentation can void the policy.

Subrogation transfers the insured's recovery rights against the negligent third party to the insurer after paying the claim, capped at the amount paid.

Contribution applies when two or more policies cover the same loss; each pays pro rata or as excess, never exceeding the loss.

Proximate cause is the dominant, effective cause of loss; remote causes are disregarded in determining coverage.

Actual total loss extinguishes the subject matter; constructive total loss occurs when repair or recovery cost exceeds the insured value.

Offer is the application; acceptance occurs when the insurer issues the policy or binds cover; consideration is the premium.

Warranty is a condition the insured promises to fulfill; breach generally discharges the insurer, subject to statutory relief provisions.

Representation is a statement made before contract formation; it must be material and false to allow avoidance.

Conditions precedent (notice, proof of loss) must be satisfied before the insurer's liability attaches; conditions subsequent relate to post-loss duties.

Exclusions remove specified perils or property from cover; contra proferentem construes ambiguity against the drafter.

Void policies are invalid from inception; voidable policies are valid until rescinded by the innocent party.

Utmost good faith, indemnity, and insurable interest are implied by law and cannot be contracted away by standard clauses.

Policy interpretation reads the contract as a whole; specific clauses prevail over general ones, and handwritten terms over printed.

Fire policy covers fire, lightning, and explosion of domestic gas; allied perils (windstorm, flood, earthquake) require extension.

Marine cargo cover: Institute Cargo Clauses A (all risks), B and C (named perils); general average and salvage charges are covered.

Motor policy: own damage, third-party property damage, third-party bodily injury; compulsory TPL is statutory minimum.

Engineering: Contractors' All Risks (CAR) and Erection All Risks (EAR) cover construction/erection plus third-party liability.

Public liability covers third-party bodily injury and property damage; product liability covers harm from goods supplied.

Personal accident pays fixed benefits for accidental death, disability, and medical expenses; no indemnity principle applies to fixed benefits.

Allied lines include burglary, money, fidelity guarantee, plate glass, and business interruption, often attached to fire policies.

Business interruption indemnifies loss of gross profit and increased cost of working during the indemnity period.

Risk selection screens applicants against underwriting criteria; reject, accept at standard rate, or accept with loading/excess.

Premium = rate × exposure base (sum insured, payroll, gross receipts) plus policy fees and taxes.

Experience rating adjusts manual premium by the insured's own loss history using a credibility-weighted modifier.

Retrospective rating sets final premium based on actual losses during the policy period, subject to minimum and maximum.

Reinsurance: treaty (automatic) vs facultative (case-by-case); proportional (quota share, surplus) vs non-proportional (excess of loss, stop loss).

Retention is the amount the cedent keeps; cession is the portion transferred to the reinsurer.

Risk improvement measures (sprinklers, alarms) reduce loss frequency and justify credits in rating.

Co-insurance clauses require the insured to insure to a stated percentage of value or bear a penalty on partial losses.

Notice of loss must be given promptly; late notice may prejudice the claim if it hinders investigation.

Proof of loss is a sworn statement of the amount claimed, supported by invoices, police reports, and repair estimates.

Investigation establishes cause, extent, and coverage; adjusters may examine the insured under oath.

Settlement applies deductible, depreciation, and policy limits; actual cash value = replacement cost minus depreciation.

Salvage is the residual value of damaged property; it is deducted from the loss or retained by the insurer.

Subrogation is pursued after settlement against negligent third parties; the insured must not prejudice those rights.

Dispute resolution: internal complaint, Insurance Commission adjudication, arbitration clause, or civil action.

Average clause reduces payment proportionally when the sum insured is less than the value at risk.

Insurance Commission licenses insurers, brokers, agents, and adjusters; unlicensed solicitation is prohibited.

Agents represent insurers; brokers represent the insured and owe a duty of care and disclosure.

Market conduct rules govern advertising, disclosure, premium collection, and claim settlement timelines.

Anti-fraud: misrepresentation, staged accidents, arson-for-profit, and premium diversion are criminal and administrative offenses.

Insurers must maintain solvency margins, statutory deposits, and minimum paid-up capital as prescribed.

Premium remittance by agents is held in a fiduciary capacity; commingling with personal funds is prohibited.

Ethical duties: confidentiality, avoiding conflicts of interest, fair dealing, and accurate policy documentation.

Regulatory examinations and reporting requirements ensure compliance with the Insurance Code and circulars.

Unearned premium reserve recognizes premium for the unexpired portion of the policy term.

Loss reserves (IBNR and case reserves) estimate incurred but unpaid claims; adequacy affects solvency.

Solvency margin compares admitted assets to liabilities; regulators set minimum capital and surplus requirements.

Financial statements: balance sheet, income statement (premiums, losses, expenses, underwriting result), and cash flow.

Investments must meet admissibility and diversification rules; liquidity is needed to meet claim obligations.

Taxation: premium tax applies to gross premiums; claims paid and reserves may be deductible subject to regulation.

Combined ratio = loss ratio + expense ratio; a ratio below 100% indicates underwriting profit.

Reinsurance recoverable is an asset; credit risk on reinsurers must be assessed for solvency purposes.

Insurable interest in property must exist at inception and at time of loss; a mere expectation of benefit is insufficient.

Indemnity principle limits recovery to actual financial loss; fixed-benefit policies (personal accident) are exceptions.

Utmost good faith requires disclosure of material facts known to the insured; concealment can avoid the contract.

Subrogation prevents double recovery by transferring the insured's rights against the third party to the insurer.

Contribution allocates loss among concurrent policies; insured cannot recover more than the loss.

Proximate cause determines coverage; the dominant cause, not the last event, governs.

Constructive total loss arises when repair cost exceeds insured value; insured may abandon to the insurer.

Speculative risk is uninsurable; pure risk and fortuitous events are insurable.

Offer and acceptance: application is offer; policy issuance or binder is acceptance; premium is consideration.

Warranty breach discharges insurer; representations must be material and false to allow avoidance.

Conditions precedent include notice and proof of loss; failure may bar the claim.

Exclusions are interpreted narrowly; ambiguity is construed against the insurer (contra proferentem).

Void policy is invalid ab initio; voidable policy is valid until rescinded.

Policy is read as a whole; specific clauses prevail over general; handwritten over printed.

Material facts include prior losses, hazardous occupancy, and existing insurance; non-disclosure voids.

Insurable interest and indemnity are implied terms that standard clauses cannot override.

Fire policy covers fire, lightning, and domestic gas explosion; allied perils need extension.

Marine cargo: ICC A (all risks), B and C (named perils); general average and salvage covered.

Motor: own damage, third-party property damage, third-party bodily injury; compulsory TPL minimum.

CAR and EAR cover construction/erection risks and third-party liability.

Public liability covers third-party injury and property damage; product liability covers goods supplied.

Personal accident pays fixed benefits for death, disability, medical expenses; no indemnity principle.

Business interruption indemnifies gross profit loss and increased cost of working.

Allied lines: burglary, money, fidelity, plate glass, often attached to fire policies.

Premium = rate × exposure base plus fees and taxes.

Experience rating uses the insured's loss history with credibility weighting.

Retrospective rating sets premium based on actual losses within min/max bounds.

Reinsurance: treaty vs facultative; proportional vs non-proportional.

Retention is the cedent's share; cession is the reinsurer's share.

Risk improvements (sprinklers, alarms) reduce frequency and earn credits.

Co-insurance clause requires insurance to a stated percentage of value or penalty applies.

Risk selection outcomes: reject, standard, or substandard with loading/excess.

Prompt notice of loss is required; late notice may prejudice the claim.

Proof of loss is a sworn statement supported by invoices and reports.

Investigation establishes cause, extent, and coverage; examination under oath may apply.

Settlement deducts deductible, depreciation, and applies policy limits.

Actual cash value = replacement cost minus depreciation.

Salvage value is deducted from the loss or retained by insurer.

Subrogation is pursued after settlement; insured must not prejudice rights.

Average clause reduces payment proportionally for underinsurance.

Insurance Commission licenses insurers, brokers, agents, and adjusters.

Agents represent insurers; brokers represent insureds and owe disclosure duties.

Market conduct rules govern advertising, disclosure, and claim timelines.

Anti-fraud covers misrepresentation, staged accidents, arson, premium diversion.

Solvency margins, statutory deposits, and minimum capital are mandated.

Agent premium remittance is fiduciary; commingling is prohibited.

Ethical duties: confidentiality, conflict avoidance, fair dealing.

Regulatory examinations ensure compliance with the Insurance Code.

Unearned premium reserve covers the unexpired policy term.

Loss reserves include case reserves and IBNR estimates.

Solvency margin compares admitted assets to liabilities.

Financial statements: balance sheet, income statement, cash flow.

Investments must meet admissibility and diversification rules.

Premium tax applies to gross premiums; claims and reserves may be deductible.

Combined ratio = loss ratio + expense ratio; below 100% is underwriting profit.

Reinsurance recoverable is an asset subject to credit risk assessment.