IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

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1 Understand the nature 1.1 Describe the concepts of risk and 1.1.1 Definitions of risk.
9 and main features of risk risk perception. 1.1.2 Alternative meanings of risk.
questions within the insurance 1.1.3 Risk and uncertainty.
environment. 1.1.4 Attitude to risk.
1.2 Explain the risk management 1.2.1 Definition.
function and process. 1.2.2 Stages - risk identification, analysis and control.
1.2.3 Insurers role in loss prevention and control.
1.2.4 Examples of risk management tools used by insurers.
1.2.5 Professionals and industry bodies relevant to risk management.
1.3 Describe the various categories of 1.3.1 Financial and non financial definitions.
risk. 1.3.2 Pure and speculative.
1.3.3 Particular and fundamental.
1.3.4 Benefit policies.
1.3.5 Relationship between risks.
1.4 Explain the types of risk that can be 1.4.1 Requirements for insurability - fortuitous event, insurable interest, public
insured and the types of risk that policy, homogenous exposures.
cannot. 1.4.2 Examples of risks that can and cannot be insured.
1.5 Describe the components of risk. 1.5.1 Uncertainty.
1.5.2 Level of Risk.
1.5.3 Peril and Hazard.
1.5.4 Frequency and Severity.
1.5.5 Risk factors for insurers and the way they model risk.
1.6 Understand the relationship 1.6.1 Define the relationship.
between frequency and severity
and how they are applied. 1.6.2 Common examples to illustrate the concept.
1.7 Explain the difference between a 1.7.1 Definition of peril.
peril and hazard as they relate to 1.7.2 Definition of hazard.
insurance. 1.7.3 How the two interact with some common examples.

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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

2 Know how to apply the 2.1 Apply the main features of risk and 2.1.1 Indicative examples and outcomes.
main features of risk and risk management to different sets
2 risk management to a of circumstances/scenarios. 2.1.2 Physical and moral hazards.
questions given set of
2.1.3 Application across home, motor, commercial and pet insurance.
circumstances.
3 Understand the main 3.1 Explain the need for insurance. 3.1.1 Define what is meant by risk transfer mechanism.
8 features of insurance. 3.1.2 Peace of mind.
questions 3.1.3 Macro and micro economic stability.
3.2 Explain the basis of insurance as a 3.2.1 What is risk transfer.
risk transfer mechanism. 3.2.2 Law of large numbers and the pooling of risks.
3.2.3 Equitable premiums.
3.3 Describe how insurance benefits 3.3.1 Examples of how insurance benefits individual consumers.
policyholders and society in 3.3.2 Examples of how insurance protects businesses.
general. 3.3.3 Examples of how insurance benefits the economy.
3.4 Explain the term coinsurance and 3.4.1 Where an insured covers a percentage of a risk.
how this is used in two distinct 3.4.2 Where more than one insurer covers a percentage of a risk.
ways in the insurance market. 3.4.3 Define the impact of franchises, excesses and deductibles.
3.4.4 Explain why sharing of risks may benefit insurers and insureds.
3.5 Describe what is meant by dual 3.5.1 Define dual insurance and how it is different from coinsurance.
insurance and self-insurance. 3.5.2 Define self insurance.
3.5.3 Distinguish between coinsurance, dual insurance and self insurance.
3.6 Describe the main classes of 3.6.1 Define each class of insurance including property insurance, pecuniary
insurance. insurance, motor insurance, liability insurance, marine and aviation
insurance, health and combined or package policies.
3.6.2 Detail the main elements of cover for each class of business.
3.7 Explain the purpose of Insurance 3.7.1 Describe purpose (solely to collect revenue) for government.
Premium Tax.
3.8 State the current rates of Insurance 3.8.1 State current rates and how they differ - (1) Standard rate currently 12%
Premium Tax and how it is and which policies (2) Higher rate of 20% and which policies (3) Exempt
collected. policies.
3.8.2 Who collects on a policy by policy basis.

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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

4 Know the structure and 4.1 Describe the structure of the 4.1.1 Define buyers and detail sub buyers.
14 main features of the insurance market and the five main 4.1.2 Role of insurers.
questions insurance market. groups of people. 4.1.3 Role of intermediaries.
4.1.4 Role of comparison websites (aggregators).
4.1.5 Role of reinsurers.
4.2 Describe the main categories of 4.2.1 Proprietary companies.
insurer in terms of ownership. 4.2.2 Mutual Companies.
4.2.3 Captive Companies including protected cell companies.
4.2.4 Lloyd's.
4.2.5 Composite companies.
4.2.6 Specialist insurers.
4.3 Explain the structure of the Lloyd’s 4.3.1 What is Lloyds and how does it differ from the rest of the market.
market and main features. 4.3.2 Who invests and owns Lloyd's.
4.3.3 Role of the different stakeholders in Lloyd's syndicates, managing agents,
members agent, Council of Lloyds.
4.3.4 Transacting business - Lloyds brokers and Market Reform Contracts and
how a contract is made.
4.3.5 Access to the Lloyds Market.
4.3.6 Main focus of cover provided.
4.4 Describe the London Market. 4.4.1 Definition of the London Market.
4.4.2 Describe the purpose of this market nationally and internationally.
4.4.3 The key stakeholders in the London Market.
4.5 Describe the distribution channels 4.5.1 Explain role of intermediary.
used for the selling of insurance. 4.5.2 Agents.
4.5.3 Brokers.
4.5.4 Lloyd’s Brokers.
4.5.5 Role of authorised persons and appointed representatives.
4.5.6 Direct insurance.
4.5.7 Price comparison websites (aggregators).
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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

4.6 Explain the purpose of reinsurance. 4.6.1 Benefits and purpose of reinsurance.
4.6.2 Smoothing peaks and troughs.
4.6.3 Protecting portfolio of business.
4.6.4 Improving product range.
4.7 Describe the key roles of 4.7.1 Explain the role examples of - underwriters, claims personnel, loss
professionals in insurance. adjusters, loss assessors, surveyors and those providing forensic services,
actuaries, risk managers and compliance officers.
4.8 Explain the main functions of the 4.8.1 Association of British Insurers.
principal market organisations. British Insurance Brokers Association.
International Underwriting Association of London.
London Market Regional Committee.
London and International Insurance Brokers Association.
Lloyd’s Market Association.
Managing General Agents Association.
Chartered Insurance Institute.
Chartered Institute of Loss Adjusters.
Institute and Faculty of Actuaries.
Institute of Risk Management.
Association of Insurance and Risk Managers in Industry and Commerce.
Motor Insurers' Bureau.

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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

5 Understand contract and 5.1 Describe the essential elements of 5.1.1 Offer and acceptance.
9 agency. a valid contract. 5.1.2 Consideration.
questions 5.1.3 Intention to create legal relations.
5.1.4 Capacity to contract.
5.1.5 Consensus ad idem.
5.1.6 Legality of purpose.
5.1.7 Possibility of performance.
5.1.8 Contract certainty of terms.
5.1.9 Parties to a contract.
5.1.10 Evidence of the contract.
5.2 Explain conditional and 5.2.1 Define conditional acceptance.
unconditional acceptance of a 5.2.2 Define unconditional acceptance.
contract.
5.3 Describe consideration which 5.3.1 Definition of consideration.
supports the contract. 5.3.2 Examples of where there is and is not consideration.
5.3.3 Impact of no consideration in a contract.
5.4 Explain how contracts can be 5.4.1 Cancellation and method.
cancelled or terminated. 5.4.2 Insured and insurers rights at cancellation.
5.4.3 Fulfilment.
5.4.4 Voidable contracts.
5.4.5 Breach of warranty.
5.4.6 Fraud.
5.5 Describe methods of creating an 5.5.1 Agency by consent and Terms of Business Agreements.
agent/ principal relationship. 5.5.2 Agency by necessity.
5.5.3 Agency by ratification.
5.6 Describe the duties of an agent and 5.6.1 Agent - compliance with instructions.
the duties of a principal. 5.6.2 Personal performance.
5.6.3 Due care and skill.
5.6.4 Good faith.
5.6.5 Accountability.
5.6.6 Principal - remuneration.
5.6.7 Indemnity.
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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

5.7 Explain the consequences of an 5.7.1 Explain when a principal is bound by the acts of an agent.
agent’s actions on the principal. 5.7.2 Actual authority (express and implied).
5.7.3 Apparent authority.
5.7.4 Consequences for both the agent and the principal for actions that have
not been agreed.
5.8 Describe what should be included 5.8.1 General requirements
in a Terms of Business Agreement a) Clear and succinct.
(TOBA) between insurers and b) Reflection business relationship.
intermediaries. c) Define responsibilities and rights.
d) Regulatory and statutory compliance.
5.8.2 Status.
5.8.3 Commission.
5.8.4 Material information.
5.8.5 Premiums and credit.
5.8.6 Claim money.
5.8.7 Broker/client relationship.
5.8.8 Direct admin.
5.8.9 Claims.
5.8.10 Termination.
5.8.11 Regulatory requirements.

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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

6 Understand the principle 6.1 Define insurable interest and its 6.1.1 Definition of insurable interest.
5 of insurable interest. components. 6.1.2 Explanation of components
questions (i) Subject matter.
(ii) Legal relationship.
(iii) Financial value.
6.2 Explain the timing of insurable 6.2.1 Describe in general the importance of timing of insurable interest for
interest. different classes of business.
6.3 Explain how insurable interest can 6.3.1 Explain three methods insurable interest can arise from
arise. (i) Common law.
(ii) Contract.
(iii) Statute.
6.4 Explain the application of insurable 6.4.1 Property
interest to property and liability (i) Part or joint owners.
insurance contracts. (ii) Agents.
(iii) Bailees.
(iv) Tenants (all with examples) Liability - examples of liability under
common law and contract.

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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

7 Understand the principle 7.1 Explain the principle of good faith 7.1.1 Definition of good faith.
of good faith. and how this applies to contracts
11 7.1.2 Who it applies to.
of insurance.
questions
7.2 Explain how the duty of fair 7.2.1 Definition of fair presentation.
presentation operates in insurance 7.2.2 Circumstances when this may be modified by policy.
policies and how it can be altered
in terms of the policy. 7.2.3 Changes to material circumstances.
7.3 Define material circumstances. 7.3.1 Definition of material circumstances.
7.3.2 Current legislation.
7.4 Identify and distinguish between 7.4.1 Explanation of physical and moral hazards.
physical and moral hazards in
7.4.2 Application of these concepts.
relation to a proposal.
7.5 Explain an insurer’s right to 7.5.1 Explain why insurers have a right to information.
information. 7.5.2 Material Circumstances definition and application in insurance.
7.5.3 Waiving of rights to information.
7.6 Explain material circumstances that 7.6.1 Explain what information does not need to be disclosed to an insurer and
do not require disclosure. why
(i) Facts of law.
(ii) Facts of public knowledge.
(iii) Facts that lessen the risk.
(iv) Facts where insurer has waived right.
(v) Facts on a survey.
(vi) Facts outside knowledge of insured.
(vii) Facts outside scope of specific questions.
(viii) Facts covered by policy terms.
(ix) Spent convictions.
7.7 Explain the consequences of non- 7.7.1 Voiding, avoiding ab initio and repudiating the claim.
disclosure or a breach of the duty 7.7.2 Impact of Financial Conduct Authority rules.
of fair presentation. 7.7.3 Impact of Financial Ombudsman Service approach.
7.7.4 Where the insurer cannot act on the breach.

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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

8 Understand the doctrine 8.1 Explain the meaning of proximate 8.1.1 Define proximate cause.
of proximate cause and cause.
2 its application to non- 8.2 Apply proximate cause to scenarios 8.2.1 Provide simple scenarios.
questions complex claims. that relate to non-complex claims.
9 Understand the principle 9.1 Define the principle of indemnity. 9.1.1 Illustrate the definition and meaning of indemnity.
7 of indemnity and how 9.2 Explain the settlement options 9.2.1 Cash payment.
questions this is applied to available to insurers which will 9.2.2 Repair.
contracts of insurance. provide the insured with the 9.2.3 Replacement.
necessary indemnity.
9.2.4 Reinstatement.
9.3 Identify and distinguish between 9.3.1 Define indemnity policy.
indemnity and benefit policies. 9.3.2 Define benefit policy.
9.3.3 Explain how calculation of payments under each policy differ.
9.4 Explain what is meant by agreed 9.4.1 Explain and give examples of claim scenarios for agreed value policies.
value policies, first loss policies and 9.4.2 First loss policies.
new for old cover. 9.4.3 New for old cover.
9.5 Calculate a non-complex claim 9.5.1 What is underinsurance.
payment, subject to the pro rata 9.5.2 What is average.
condition of average. 9.5.3 Why it is applied.
9.5.4 How it is calculated with the relevant formula and examples.

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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

10 Understand the principles 10.1 Explain the principle of 10.1.1 Definition of contribution and how it arises.
4 of contribution and contribution and when and how it 10.1.2 Methods of calculating (rateable proportion and independent liability)
questions subrogation. applies to the sharing of claim contribution with examples.
payments between insurers in
straightforward property cases.
10.2 Explain the principle of subrogation 10.2.1 Definition of subrogation.
and why it may or may not be 10.2.2 Who impacted by insurance contract wording.
pursued in simple circumstances. 10.2.3 Why it may not be pursued.
10.2.4 Precluded subrogation rights
a) Insured has no rights.
b) Benefit policies.
c) Subrogation waiver.
d) Negligent fellow employees.
11 Understand the main 11.1 Explain the reasons for compulsory 11.1.1 Purpose of compulsory insurance.
15 regulatory and legal insurance and describe the types of 11.1.2 Motor.
questions requirements applicable insurances which are compulsory 11.1.3 Employers’ liability.
to the transaction of in the UK. 11.1.4 Other compulsory insurances.
insurance business. 11.2 Explain the application of the 11.2.1 Importance of Consumer Rights Act 2015 in protecting consumers against
Consumer Rights Act 2015 in unfair terms in a contract.
relation to insurance contracts. 11.2.2 When terms may be deemed to be unfair.
11.3 Explain the Contracts (Rights of 11.3.1 Explain privity of contract.
Third Parties) Act 1999 in relation 11.3.2 Explain provisions of the Act and its purpose.
to insurance contracts.
11.4 Explain the role of the financial 11.4.1 Explain role of regulators in authorising, supervising and regulating
services regulators in the insurers and intermediaries.
authorisation, supervision and
regulation of insurers and
intermediaries.
11.5 Describe the financial services 11.5.1 Financial Conduct Authority objectives.
regulatory principles for businesses
and the FCA and PRA’s regulation 11.5.2 Prudential Regulation Authority objectives.
of individuals in broad outline.

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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

11.6 Explain the importance of the fair 11.6.1 The importance of the fair treatment of customers and positive customer
treatment of customers and outcomes.
positive customer outcomes.
11.7 Describe the consequences of non- 11.7.1 Types of enforcement action and considerations for enforcement.
compliance – discipline and 11.7.2 When enforcement is applied.
enforcement.
11.8 Explain the requirements for 11.8.1 Detail requirements for reporting, record keeping and training and
reporting, record keeping and competence.
training and competence.
11.9 Describe the scope and effect of 11.9.1 Application of ICOBS rules.
the Insurance: Conduct of Business
sourcebook (ICOBS) in broad
outline.
11.10 Describe the EU solvency 11.10.1 Purpose and provisions of EU Solvency requirements.
requirements for insurers and
intermediaries and financial
services regulatory risk-based 11.10.2 Consequences for insurers where capital falls below required level.
capital requirements in broad
outline.
12 Understand consumer 12.1 Describe the main provisions of the 12.1.1 Categories of data.
6 protection and dispute current data protection legislation. 12.1.2 Data Protection Act 2018 (from the General Data Protection Regulation)
questions resolution. main provisions and purpose.
12.1.3 Consequences of non adherence.
12.2 Describe the main provisions of the 12.2.1 Criminal Justice Act 1992.
current Money Laundering 12.2.2 Proceeds of Crime Act 2002.
Regulations and their application
12.2.3 Serious Crime Act 2007 and 2015.
to insurers and intermediaries.
12.2.4 Money Laundering Regulations 1993 and 2017.

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IF1 Insurance, legal and regulatory principles 2021

Learning Outcome Assessment Criteria Indicative Content

13 Know the main methods 13.1 Describe the financial services 13.1.1 Dispute Resolution: Complaints (DISP) sourcebook and requirements.
of preventing, handling regulatory requirements in relation
and resolving consumer to handling complaints.
4 complaints. 13.2 Explain the services provided by 13.2.1 Definition of complaint
questions the Financial Ombudsman Service. (ii) Who are eligible complainants.
(iii) Prior consideration by insurers.
(iv) Powers of the Financial Ombudsman Service (FOS) and level of awards
and on who they are binding.
(v) Fees and who pays.

13.3 Describe the main provisions of the 13.3.1 Purpose of scheme.

Financial Services Compensation Limits of payouts for compulsory and non compulsory insurance.
Scheme, including the range of How scheme is funded.
activities falling within its scope.
14 Understand the CII Code 14.1 Explain the five main principles in 14.1.1 List the five main principles and key provisions.
of Ethics and be able to the CII Code of Ethics.
4 apply the principles to 14.2 Apply the main principles in the CII 14.2.1 Application of common scenarios that are in insurance industry.
questions non-complex scenarios. Code of Ethics and identify positive
and negative indicators of ethical
behaviour to non-complex
scenarios.

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