Chapter 1 Flashcards
Sum Insured or Limits of Liability:
Sets the maximum amount payable. Losses exceeding this amount will not be fully covered.
Conditions Precedent to Liability (or Recovery):
Must be met for the insurer to cover a particular loss.
- If these conditions are not met, the insurer may refuse to pay for that specific loss but not necessarily cancel the entire policy.
- For future valid claims, the insurer must pay if the conditions are met at that time.
excepted/ excluded perils
those named as specifically not covered
what are Implied duties imposed by
These are imposed by common law, whether or not they are
found in the policy wording
What is meant by onus of proof in relation to a claim?
The insured’s responsibility to prove they have a valid claim
What does an insured have to prove when making a claim?
An insured peril arose that cause the loss and is covered by the policy and the amount of the loss (receipt, valuation)
What policy conditions may result in a claim only being partially paid?
The sum insured or limit of indemnity would limit the maximum amount recoverable, the clause of average when under-insurance exists and excesses and deductibles not being complied with
What are the main implied duties on an insured following a loss?
Found in common law, act as if they were uninsured, advise the authorities, minimise the loss, prevent the loss from spreading, assist the insurer where possible
What are the main express duties on an insured following a loss?
Written into the contract, usually involves informing the insurer, writing about the loss in detail and preventing any further damage
What are the core principles of insurance?
Risk management, types of risks (financial vs. non-financial, pure vs. speculative, particular vs. fundamental), insurable risks (must be fortuitous, have insurable interest, not against public policy).
What are the types of insurers?
Proprietary companies, mutual companies, mutual indemnity associations, captive insurers, protected cell companies.
What are the elements of an insurance contract?
Offer and acceptance, consideration, legal capacity, legality of purpose.
Can you give examples of insurable interest?
Property ownership, financial interest, potential liability.
What are the consequences of non-disclosure or misrepresentation?
It can void the contract.
Who are the regulatory bodies?
Prudential Regulation Authority (PRA), Financial Conduct Authority (FCA).
What measures ensure consumer protection in insurance?
Treating Customers Fairly (TCF), Financial Ombudsman Service (FOS).
What are the implied duties of the insured?
Act as if uninsured, notify authorities, prevent loss spreading, cooperate with insurer.
What terms cannot be challenged for fairness under the Consumer Rights Act 2015?
Core terms like exclusions, if they are transparent and prominent.
What is an average consumer?
Someone reasonably well informed, observant, and careful.
What happens if a term is deemed unfair?
It is not binding, but consumers can choose to rely on it.
What are conditions in an insurance policy?
Provisions that must be met for the policy to remain in effect.
What are warranties?
Promises by the insured that certain conditions will be met.
What are endorsements?
Additions or changes to the standard policy coverage.
What is moral hazard?
The tendency of insured parties to take on more risk because they do not bear the full cost of that risk. (eg criminal conviction)
When can consumers approach the FOS?
If they are not satisfied with the resolution provided by their insurer.
What is the duty of fair presentation?
The insured must disclose every material circumstance they know or ought to know, or give the insurer sufficient information to prompt further inquiry.
What happens if an insurer refuses a claim due to an exclusion?
The onus of proof shifts to the insurer to prove the exclusion applies.
What are conditions precedent to liability?
Conditions that must be met for a claim to be valid.
What is an example of a condition precedent to liability?
Maintaining an alarm system for theft coverage.
What is the average clause in property insurance?
A clause that reduces the payout in proportion to the amount of under-insurance.
Why is the average clause important?
It encourages policyholders to insure property to its full value.
What information is typically included in a policy schedule?
Details about the insured, coverage limits, premiums, and specific terms and conditions.
