C1

Question 1

What is issued when a legally binding contract is issued?

Answer 1

The policy document

Question 2

What does the policy document do?

Answer 2

Provide indemnity to the insured

Question 3

Who does the onus of proof lay on?

Answer 3

Onus of proof is on the insured

Question 4

What must the insured do when proving a claim?

Answer 4

Prove that an insured peril arose (eg. fire)

Prove the amount of loss (eg. receipt of item)

Question 5

What responsibilities does the insurer have?

Answer 5

Has to ensure:

• cover was in force at the time of the loss
• the insured is the same named in the policy
• the peril is covered by the policy
• the insured has taken steps to minimise the loss
• the duty of fair presentation has been complied with in respect of commercial customers
• the duty to take reasonable care not to make a misrepresentation has been complied with in respect of consumer customers

Question 6

What are the two types of conditions?

Answer 6

Implied conditions

Expressed conditions

Question 7

What are the three categories of breaches of condition?

Answer 7

Conditions precedent to the contract
Conditions subsequent to the contract
Conditions precedent to liability (or recovery)

Question 8

What happens if a condition precedent to liability (or recovery) is not observed?

Answer 8

insurers may avoid liability for a particular loss, but they need not repudiate the contract as a whole

Question 9

What does ICOBS stand for?

Answer 9

The Insurance: Conduct of Business Sourcebook

Question 10

What are the policy conditions that mean a claim may only be partially met?

Answer 10

• The sum insured (property insurance) or a limit of liability (liability insurance) forms part of the policy & limits the MAX amount recoverable. Claims for losses above this will not be met
• Average clause - in case of under-insurance for property insurance states that the amount paid will be reduced in proportion to the amount of under-insurance
• Voluntary or compulsory excesses or deductibles.

Question 11

What is an excess or a deductible?

Answer 11

It is the amount that is deducted from each claim and is borne by the insured. A deductible is, essentially, a large excess.

Question 12

What changed in the Consumer Act 2015?

Answer 12

If a term of a contract is not transparent or prominent, it can be assessed for unfairness

Question 13

How does the Consumer Act define a average consumer?

Answer 13

A person who is ‘reasonably well informed, observant and circumspect’

Question 14

The duties of the insured after a loss can be divided in to what two different categories?

Answer 14

Implied duties

Expressed duties

Question 15

What are implied duties?

Answer 15

Those imposed by common law eg. the law requires the insured to act though they are uninsured (to minimise the loss); advise the appropriate authorities as necessary; prevent a loss from spreading where applicable

Failure to comply = invalid contract

Question 16

What are express duties?

Answer 16

They are always written into the contract & are found as conditions in the policy. A breach

These are always written into the contract, and are usually found as conditions in the policy. A breach of these conditions allows the insurer to repudiate a particular claim, if the breach of the condition is connected to the circumstances of that claim.
There is always a condition setting out the insured’s duties in the event of an insured event occurring. It is often entitled ‘claims procedure’ or ‘action by the insured’.
Although the condition may vary in length and detail from policy to policy, the action required by the insured will be to:
• notify the insurer promptly;
• involve the emergency services, if appropriate;
• take reasonable steps to prevent further damage; and
• give proof and details of the loss in writing within a certain timescale.