Free CII IF1 Exam Flashcards

Fire is a pure risk: loss or no loss, with no chance of gain. A share investment can gain or lose value, making it speculative.

Fire is the peril, the event causing loss. Flammable storage beside the panel is a physical hazard that raises the chance or severity of that peril.

Frequency is how often losses occur; severity is the size of each loss. Expected claims cost depends on both, broadly frequency multiplied by average severity.

The insurer can predict the aggregate loss of a large pool more reliably than any one person’s loss, then spread that expected cost across premiums. Concentrated or highly correlated losses undermine that predictability.

Sprinklers reduce the likelihood or severity of fire loss; insurance transfers specified financial loss. The factory retains exclusions, deductibles, limits and other uninsured loss.

The customer pays a premium and transfers specified financial consequences of a risk to the insurer. The underlying event can still occur, and exclusions or deductibles remain with the customer.

It can mean several insurers sharing one risk in agreed proportions from inception, or a policy term under which the insured retains a stated share of each loss. Check which meaning the context uses.

Dual insurance is overlapping cover under separate policies for the same interest and risk; insurers may contribute to one indemnity. Self-insurance means the person or firm retains and funds its own losses instead of transferring them.

The standard rate is 12%. The higher rate is 20% for travel insurance and certain insurance sold with appliances or motor vehicles. IPT taxes taxable general-insurance premiums, not claim payments.

The insurer underwrites the risk and owes the contractual claim payment. A broker normally arranges cover on the customer’s behalf; its precise agency role can vary by activity.

Members underwriting through syndicates assume the insurance risks. The Corporation provides market governance and services; Lloyd’s is a market, not a single insurance company.

The managing agent runs the syndicate and employs its underwriting team. Members provide the capital that backs the syndicate’s accepted risks.

The London Market is the broader wholesale market for large, specialist and international insurance and reinsurance. Lloyd’s is one marketplace within it; company insurers also operate there.

The broker gathers the client’s requirements and seeks suitable cover and terms from insurers, then communicates the placement. Any authority to bind an insurer must be separately established.

Reinsurance transfers part of the insurer’s exposure to a reinsurer, helping manage large losses and capital. The original insurer remains liable to its policyholder under the direct policy.

Whether the insurer will accept the risk and, if so, the terms, premium, limits and conditions on which it will do so.

Offer and acceptance, consideration, intention to create legal relations and contractual capacity, with sufficiently certain and lawful terms.

The insurer has proposed a condition or different term. Cover arises on the agreed terms only once the parties’ offer and acceptance align, subject to any stated inception requirements.

The policyholder promises or pays the premium; the insurer promises cover for insured events under the policy terms.

The insurer, as principal, is bound by the authorised act of its agent. A broker’s role must be checked for the specific activity because it may act for the customer in other respects.

They have a recognised financial or legal relationship with it such that its loss or damage would cause them a loss, not merely a wish that it remain safe.

At the time of loss, because the claimant must suffer a real financial loss then. A former owner who sold the property before the loss normally has no claim for that property loss.

To make a fair presentation of the risk under the Insurance Act 2015: disclose every material circumstance known or that ought to be known, or give enough information to put a prudent insurer on notice to enquire.

It would influence the judgment of a prudent insurer about whether to accept the risk or on what terms; it need not necessarily change the final premium.

Consumer proposers must take reasonable care not to make a misrepresentation. They do not have the same general duty to volunteer every material circumstance as non-consumer proposers.

Unsafe wiring is a physical hazard because it increases the chance of fire. Deliberately hiding it is a moral hazard indicator and may also breach the applicable disclosure or representation duty.

No. A qualifying breach must have induced the insurer. Under the Insurance Act 2015, the remedy depends on what the insurer would have done and whether the breach was deliberate or reckless.

Ordinarily no: the insurer cannot complain that the proposer failed to disclose a circumstance the insurer knew, ought to have known, or is presumed to know. The fair-presentation duty is not a substitute for reading information received.

The proximate cause is the dominant effective cause of the loss, not necessarily the event closest in time. Test whether the storm-driven chain is insured and whether an exclusion changes the result.

To put the insured, so far as money or repair can, in the financial position held immediately before the loss, without a profit from the claim and subject to policy terms.

A benefit policy pays the agreed sum on the specified event regardless of exact financial loss; an indemnity policy measures payment by the insured’s actual covered loss.

£30,000: £40,000 × (£300,000 ÷ £400,000). Average makes the insured bear the uninsured proportion of a partial loss.

The policy deliberately caps the maximum payable for any one loss below total property value, based on the maximum probable single loss. If its terms exclude average, the claim is paid up to that first-loss limit.

Indemnity prevents profit from the loss. Contribution lets insurers share liability when their policies cover the same interest, subject matter and risk.

The insurer may pursue the insured’s recovery rights against the contractor in the insured’s name, normally only to the extent necessary to recoup its payment and subject to the insured’s rights.

It protects people injured or suffering covered property damage through vehicle use by ensuring a source of compensation even if the driver cannot personally pay.

The FCA supervises conduct toward customers and markets; the PRA focuses on insurers’ safety, soundness and prudential resilience. Many insurers are regulated by both.

The FSMA framework generally prohibits carrying on regulated activities without authorisation or exemption; authorisation lets regulators assess and supervise firms against applicable standards.

Firms must act to deliver good outcomes, including suitable products, fair value, understandable communications and effective support, rather than relying only on formal disclosure.

The FCA Insurance: Conduct of Business sourcebook sets conduct rules for insurance distribution, including customer information, sales and claims-related requirements where applicable.

Capital and solvency requirements provide a buffer against adverse claims and other risks so the insurer can meet policyholder obligations.

Written consumer terms must be transparent: plain, intelligible and legible. Unfair terms may be non-binding; key price or subject-matter terms escape fairness assessment only if transparent and prominent.

The Contracts (Rights of Third Parties) Act 1999 can let an identified third party enforce a term intended to benefit them, unless the contract excludes that route; check the wording and statutory conditions.

Identify a lawful basis and any additional condition for special-category data; use it only for a specified purpose, minimise it, secure it and respect the person’s rights under UK GDPR and the Data Protection Act 2018.

Risk varies by customer, product, geography and transaction. Higher-risk cases require enhanced checks and monitoring, while firms must still complete baseline due diligence and report suspicions where required.

Follow the firm’s reporting procedure promptly, usually by informing its nominated officer or money-laundering reporting officer for assessment and any required suspicious activity report. Staff must avoid tipping off where prohibited.

An eligible customer can usually refer an unresolved complaint to the Financial Ombudsman Service within the applicable referral time limit; the FSCS is for eligible claims when a firm has failed.

It is a statutory compensation scheme of last resort. It may pay eligible protected insurance claims according to the applicable cover category and rules, rather than decide ordinary disputes with a solvent insurer.

The duties to act with integrity and in each client’s best interests are directly engaged. The five core duties also require legal compliance, high service standards and fair treatment.

Treat the person fairly and respectfully, make reasonable adjustments where needed, and communicate clearly; equal treatment means addressing real access needs, not ignoring them.