Preview CIIN prep

A claim is not decided by the loss; it is decided by the contract read against the loss. That is the sentence the Foundation paper is built on, and it is why a candidate who can recite the classes of business but not the warranties keeps failing the same question: the examiner gives a fact pattern — non-disclosure, a change of use, a fire started by workmanship, a lapsed premium — and asks what the insurer owes. Everything else in the level (risk classification, the market's institutions, the regulator's rules) exists to explain why the contract is written the way it is. Read the four principles as one machine. Insurable interest says WHO may insure and for HOW MUCH; utmost good faith says WHAT must be said before the contract exists; indemnity says WHAT the recovery may equal, and its companions — subrogation, contribution, salvage, the average clause and the excess — are the tools that enforce that ceiling; proximate cause says WHICH loss the promise actually covers. A claim declines on one of those four grounds nearly every time, and a good answer names the ground before it discusses the loss.

Insurable risk is not any risk. It is a large number of homogeneous exposures, each with a fortuitous — accidental, not certain — loss of an ascertainable amount, in a category that is not against public policy, and affordable relative to the exposure's value. Pure risk (fire, theft, liability) insures; speculative risk (a bet on a commodity price) does not, because the insured would profit if nothing happened. Moral and morale hazard — dishonesty, and the carelessness that follows being covered — are the reasons wordings carry conditions, warranties and deductibles at all. The premium is the examination's first arithmetic. If a class of 20,000 similar dwellings expects 40 fire losses a year averaging ₦1,250,000, the expected cost of the class is ₦50,000,000 and the pure rate per dwelling is ₦2,500. Add expense and a margin for profit and catastrophe — say 30% — and the gross premium is ₦3,250. Examiners test the direction of this: an expense loading that is too small starves the claims department, and an insurer that prices by matching a competitor rather than its own loss record writes the business it cannot pay for. The law of large numbers is only a licence to average — it says nothing about a year in which the exposures are correlated, which is why the regulator cares about catastrophe loading and reinsurance.