When an insurer terminates an insurance policy, what condition does NOT apply?

The correct choice is based on the application of insurance policy termination practices. When an insurer terminates an insurance policy, certain conditions must be followed to ensure the process is fair and transparent for the insured.

In British Columbia, the requirement for a refund upon termination of a policy should ideally be based on an "earned" premium rather than on a short rate basis. When calculated on a short rate basis, the refund received by the insured would not accurately reflect the premium that was actually earned by the insurer for the time the policy was in force. Instead, the calculation should favor a pro-rata basis, which means the refund would more equitably represent the unearned premium returned to the insured based on the exact duration for which they were insured.

This understanding aligns with consumer protection principles in the insurance industry, where clear, fair treatment of the insured is prioritized. Therefore, the implication that a short rate basis applies in the context of policy termination is not correct; instead, the refund should adhere to a pro-rata basis, thus making option B the condition that does not apply when an insurer terminates an insurance policy.