C1B

Question 1

What is needed for a contract to be legally binding?

Answer 1

Offer
Acceptance of the offer
Consideration

Question 2

What are many contracts dealt with?

Answer 2

Caveat Emptor aka Buyer Beware

Question 3

What is meant by the principle of utmost good faith?

Answer 3

imposes a duty that any party wanting to take out insurance (aka proposer) must provide all information asked by the insurer, make fair presentation to the insurer

Question 4

Difference between consumers & non-consumers in regards to Utmost Good Faith?

Answer 4

Consumers - ensures all information provided in response to the insurers questions is FULL and ACCURATE
Non-consumers - ensure that a ‘reasonable search’ has been carried out of the proposer’s business and important information has been SIGNPOSTED

Question 5

Define a Material Fact?

Answer 5

Marine Insurance Act 1906 states ‘Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk’

Question 6

Consumer Insurance (Disclosure & Representations) Act 2012 - CIDRA - consumers & material facts

Answer 6

Consumers are only obliged to answer questions asked by them by insurers in the PROPOSAL FORM, but they must do so FULLY & ACCURATELY

Question 7

Insurance Act 2015 - non-consumers & material facts

Answer 7

Non-consumers - a circumstance is material if it would influence the judgment of a PRUDENT INSURER in determining whether to take the risk and if so on what terms

Question 8

Examples of Material Information / Circumstances

Answer 8

Special or unusual facts relating to the risk

Any particular concerns which are leading to the request for insurance

Question 9

CIDRA 2012 & definition of Material Fact

Answer 9

Can be classed as material if it could influence the judgment of a PRUDENT insurer

Question 10

What is the core change under CIDRA

Answer 10

It abolishes the duty on consumers to volunteer material facts. They must answer all questions asked by the insurer fully and accurately & they must take care not to make a MISREPRESENTATION

Question 11

Define a consumer

Answer 11

A consumer can be defined as an individual who purchases an insurance policy primarily for their own private needs & not related to their profession, business or trade

Question 12

Insurance Act 2015 Key Difference

Answer 12

Makes provisions for non-consumers (eg. commercial risks and businesses)

Question 13

Insurance Act MAIN POINTS

Answer 13

Duty on non-consumers to make a FAIR PRESENTATION OF THE RISK

Question 14

What are the 3 key elements of a fair presentation of risk

Answer 14

1) Proposer must disclose every material circumstance which it knows or ought to know
2) Proposer must ensure its representation of the risk is CLEAR & ACCESSIBLE - relates to how information is presented hence SIGNPOSTING
3) ALL material circumstances represented must be substantially correct & made in good faith

Question 15

When does the duty of fair presentation start?

Answer 15

When negotiations begin (aka when quote is requested) & lasts throughout the life of any policy

Question 16

What happens to the duty of fair presentation if there is a MTA?

Answer 16

The duty of disclosure if revived as if a new contract is formed
Insurers must draw attention to insured’s answers to questions & confirm there are still accurate & explain significance of non-disclosure & misrepresentation

Question 17

Does the duty of fair presentation exist at renewal?

Answer 17

Yes

Question 18

Does the duty of fair presentation exist in the event of a claim?

Answer 18

Yes

Question 19

What are the 2 categories of breaching the duty of fair presentation?

Answer 19

Non-disclosure

Misrepresentation

Question 20

What happens if the breach was deliberate or reckless?

Answer 20

The insurer could avoid the policy & refuse claims

Question 21

What happens if the breach was careless

Answer 21

The insurer could alter their terms or proportionally reduce the amount paid for a claim

Question 22

What happens if the breach is fraudulent? (aka concealment)

Answer 22

Policy is voidable
Insurer can keep the premium & sue for damages
insurer can ignore the breach of good faith in which case the policy continues & would pay the claim

Question 23

What is a peril?

Answer 23

That which gives rise to a lose

Question 24

What is a hazard?

Answer 24

That which influences the operation of the peril

Question 25

What is a physical hazard?

Answer 25

Relates to the physical nature of the risk

Question 26

What is a moral hazard?

Answer 26

Arises from the attitude & conduct of people

Question 27

What is the most common way of attaining information?

Answer 27

A Proposal Form

Question 28

When are risk surveys used?

Answer 28

To obtain information where the risk is too large / complex

Question 29

When are supplementary questionnaires used?

Answer 29

When dealing with specific aspects of risks eg. hairdresser where the extent of dyes / tints may require further investigation

Question 30

Under the Insurance Act 2015, what type of breach allows the insurer to proportionately reduce the amount paid for a claim?

Answer 30

A breach that is neither deliberate or reckless

Question 31

What is consideration?

Answer 31

It is a benefit received by one party in return for the promise of the performance of an act by another

Question 32

For a commercial customer, the meaning of the term ‘material circumstance’ is defined in

Answer 32

Insurance Act 2015

Question 33

Misrepresentation on the part of the insured involves

Answer 33

making a statement about the risk to be insured which is substantially false

Question 34

The Consumer Insurance (Disclosure and Representations) Act 2012 applies to

Answer 34

Consumers Only

Question 35

The Insurance Act 2015 specifically requires a proposer to ensure that its representation of the risk is:

Answer 35

Full & Accurate

Question 36

The principle of ‘caveat emptor’ applies to

Answer 36

contracts in general but not insurance contracts.

Question 37

Under the Consumer Insurance (Disclosure and Representations) Act 2012, when assessing whether a consumer has taken reasonable care, insurers must consider

Answer 37

how clear the insurer’s questions are