Chapter 1: Material Information Flashcards
For a contract to be legally binding which elements need to be present?
1) An offer
2) Acceptance of the offer
3) Consideration
What does the term ‘Utmost Good Faith’ mean?
Utmost Good Faith is a term which means both parties to the insurance contract have a duty to act honestly and not mislead or withhold critical information from one another.
Have there been any changes in the term ‘Utmost Good Faith’?
The common law principle of the term still exists at the core of insurance contracts, however the definition has been modified by recent legislation and is now referred to as ‘Good Faith’.
What is the role of an underwriter?
The role of an underwriter involves assessing the risk which people bring to the pool.
What legal principle governs insurance policies?
Good faith
The definition of what constitutes a material circumstance is now set out in which insurance act?
Insurance Act 2015 - section 7
What is the definition of what constitutes a material circumstance?
“… a circumstance or representation is material if it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms”
Give three examples of material circumstance
- Special or unusual facts relating to the risk
- Any particular concerns relating to the request for insurance
- Any facts that are specific to the class of business
What is a peril?
A peril can be defined as that which gives rise to a loss.
What is a hazard?
A hazard can be defined as that which influences the operation of the peril.
What is a physical hazard?
A physical hazard relates to the physical nature of the risk and includes measurable dimensions of the risk. For example: Motor Insurance - age of driver, condition of vehicle etc.
What is a moral hazard?
A moral hazard arises from the attitude and conduct of people. For example: Carelessness - a drivers la k of care can increase the chance of an accident and the severity.
