Insurance Commission Licensure Exam - Non-Life flashcards

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

Insurable interest

A pecuniary interest in the subject matter such that the insured benefits from its preservation and suffers loss from its destruction; required at inception and at loss in property insurance.

Indemnity principle

Restores the insured to the pre-loss financial position without profit; fixed-benefit policies such as personal accident are exceptions to this principle.

Utmost good faith

Mutual duty to disclose all material facts; concealment or misrepresentation of material facts allows the insurer to avoid the contract.

Subrogation

Transfer of the insured's recovery rights against a negligent third party to the insurer after paying the claim, limited to the amount paid.

Contribution

Right of an insurer to share a loss with other insurers covering the same interest; the insured cannot recover more than the actual loss.

Proximate cause

The dominant, effective cause of a loss; remote causes are disregarded in determining whether a peril is covered under the policy.

Constructive total loss

A loss where repair or recovery cost exceeds the insured value, allowing the insured to abandon the property and claim a total loss.

Offer and acceptance

The application is the offer; policy issuance or a binder is acceptance; the premium is consideration; all are required to form a valid contract.

Warranty

A promise by the insured that a stated fact is true or a condition will be fulfilled; breach generally discharges the insurer from liability.

Representation

A statement made before contract formation; it must be material and false for the insurer to avoid the policy.

Contra proferentem

Rule construing ambiguous policy language against the drafter, usually the insurer, in favor of the insured's reasonable interpretation.

Voidable policy

A policy valid until rescinded by the innocent party due to misrepresentation or non-disclosure; unlike a void policy, it has legal effect until avoided.

Conditions precedent

Duties such as giving notice and submitting proof of loss that must be satisfied before the insurer's liability to pay attaches.

Institute Cargo Clauses A

Marine cargo cover on an all-risks basis, subject to stated exclusions; broader than clauses B and C, which list named perils only.

Contractors' All Risks

Engineering policy covering construction works, materials, and third-party liability during the contract period, subject to exclusions and limits.

Business interruption cover

Indemnifies loss of gross profit and increased cost of working during the indemnity period following an insured property loss.

Personal accident benefits

Fixed sums payable for accidental death, disability, and medical expenses; not subject to the indemnity principle.

Allied lines

Ancillary covers such as burglary, money, fidelity guarantee, and plate glass, commonly attached to fire policies.

Experience rating

Premium adjustment using the insured's own loss history, credibility-weighted against manual rates to reflect actual risk quality.

Retrospective rating

Final premium determined by actual losses during the policy period, subject to agreed minimum and maximum premium limits.

Facultative reinsurance

Case-by-case reinsurance where the cedent offers and the reinsurer accepts each risk individually, unlike automatic treaty arrangements.

Quota share treaty

Proportional reinsurance where the cedent cedes a fixed percentage of every risk and the reinsurer shares premiums and losses proportionally.

Excess of loss reinsurance

Non-proportional reinsurance where the reinsurer pays losses above the cedent's retention up to a stated limit per occurrence or event.

Co-insurance clause

Requires the insured to carry insurance to a stated percentage of value or bear a proportional penalty on partial losses.

Proof of loss

A sworn statement of the amount claimed, supported by invoices, police reports, and repair estimates, submitted within the policy period.

Actual cash value

Replacement cost minus depreciation; the standard measure of indemnity for damaged property under most non-life policies.

Salvage

Residual value of damaged property; deducted from the loss payment or retained by the insurer after settlement.

Average clause

Reduces claim payment proportionally when the sum insured is less than the value at risk, penalizing underinsurance.

Insurance Commission licensing

Statutory requirement that insurers, brokers, agents, and adjusters be licensed before transacting insurance business.

Agent versus broker

An agent represents the insurer and binds it; a broker represents the insured and owes duties of care and disclosure.

Unearned premium reserve

Liability recognizing premium attributable to the unexpired portion of the policy term; released as cover is consumed.

Combined ratio

Loss ratio plus expense ratio; a result below 100 percent indicates an underwriting profit for the period.