IFMP Non-Life Insurance Agents Certification (NLIAC), Pakistan flashcards

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

Utmost good faith

A mutual duty requiring the proposer to disclose all material facts and the insurer to disclose material terms. Breach by the insured makes the contract voidable at the insurer's option.

Material fact

A fact that would influence a prudent underwriter in deciding whether to accept the risk, what premium to charge, or what terms and exclusions to impose.

Insurable interest

A legally recognised pecuniary relationship between the insured and the subject matter such that loss or damage causes the insured financial detriment. Required at inception for life, and at loss for marine.

Indemnity

The principle that a non-life claim restores the insured to the pre-loss financial position without profit. Valued policies and reinstatement cover are recognised exceptions.

Proximate cause

The dominant, effective, and efficient cause of a loss. Liability depends on whether the proximate cause is an insured peril, an excluded peril, or an uninsured peril.

Subrogation

After paying a claim, the insurer acquires the insured's legal right to recover the loss from the responsible third party, limited to the amount paid. Applies only to indemnity classes.

Contribution

Where two or more policies cover the same loss on the same interest, insurers share the indemnity rateably. The insured cannot recover more than the actual loss.

Average clause

A condition in property policies that reduces the claim in proportion to underinsurance: claim = loss x (sum insured / value at risk). A waiver removes this reduction.

Franchise vs excess

A franchise means no payment if the loss is below the stated amount; an excess is deducted from every otherwise payable claim. Both reduce the amount paid.

Sum insured

The maximum amount the insurer will pay under a property policy for loss or damage to the insured property, representing the declared value of the subject matter.

Limit of indemnity

The maximum amount payable under a liability policy, stated per occurrence and/or in the aggregate for the policy period. Defence costs may be inside or outside the limit.

Policy schedule

The part of the policy that records the insured's name, subject matter, sum insured, policy period, premium, excesses, and endorsements. It personalises the standard wording.

Endorsement

A written amendment to a policy that adds, removes, or varies cover, terms, or conditions. Where an endorsement conflicts with the printed policy, the endorsement prevails.

Warranty

A condition in the policy that must be complied with strictly. Breach may discharge the insurer from liability for the claim, depending on the wording and the law.

Condition precedent

A policy condition that must be satisfied before the insurer's liability arises, such as payment of premium or notification of a claim within the stated period.

Claims-made basis

Liability cover that responds to claims first made or notified during the policy period, regardless of when the act occurred. Usually paired with a retroactive date.

Occurrence basis

Liability cover that responds to injury or damage occurring during the policy period, regardless of when the claim is notified. Common in public and product liability.

Reinstatement value

A basis of settlement that pays the cost of replacing or rebuilding the property with new materials of like kind, without deduction for depreciation, subject to the sum insured.

Salvage

The residual value of damaged property recovered after a loss. The insurer may take salvage into account, and the insured cannot retain both full indemnity and salvage value.

Betterment

A deduction applied when repairs replace old parts with new, so the insured does not profit from the loss. The deduction reflects the added value of the new parts.

Constructive total loss

A loss where the cost of repair or recovery exceeds the insured value, or the property is irretrievably lost. The insured may abandon the property and claim a total loss.

Reinsurance

Insurance of an insurer's risk. Facultative is case-by-case; treaty is obligatory. Proportional treaties share premium and loss; non-proportional treaties respond above a retention.

Quota share treaty

A proportional reinsurance treaty in which the reinsurer accepts a fixed percentage of every risk written by the insurer, sharing premium, loss, and expenses in that proportion.

Excess of loss treaty

A non-proportional reinsurance treaty that pays the insurer's losses above a stated retention, up to a limit, for each loss occurrence or in aggregate.

Combined ratio

The sum of the loss ratio (incurred losses divided by earned premium) and the expense ratio. A combined ratio below 100% indicates an underwriting profit.

Unexpired risk reserve

A reserve held for the portion of premium relating to the unexpired part of the policy period, ensuring that future claims are matched with the premium earned.

IBNR reserve

Incurred but not reported reserve: an estimate for claims that have occurred but have not yet been notified to the insurer at the reporting date.

Institute Cargo Clauses (A)

An all-risks marine cargo cover that pays for all losses except those specifically excluded. It is broader than Clauses (B) and (C), which cover named perils only.

General average

A maritime principle requiring all parties in a venture to share proportionately a loss or expense deliberately incurred to save the ship and cargo from a common peril.

Business interruption

Cover for loss of gross profit and increased cost of working following insured material damage, measured over the indemnity period selected in the policy.

Personal accident cover

A benefit policy paying agreed sums for accidental death, permanent disability, or temporary disability. It is not a strict indemnity and pays the sum insured without proof of loss.

Contractor's all risks

An engineering policy covering the contract works, plant, and third-party liability during construction, excluding design defects, wear and tear, and faulty workmanship.

SECP regulation

The Securities and Exchange Commission of Pakistan regulates insurers and intermediaries under the Insurance Ordinance 2000, including solvency margins, deposits, and reinsurance arrangements.