Chapter 1: Material Information Flashcards
What does the role of the underwriter involve?
“Assessing the risk which people bring to the pool”
What elements does a contract need to be legally binding?
An offer, acceptance, and consideration
What does caveat emptor mean?
Buyer beware
Define ‘proposer’
Any party wanting to take out insurance
Define ‘good faith’
Any proposer must provide all information asked for by the insurer. In consumer contracts it must be full and accurate, and in non-consumer there must be fair presentation
How has the principle of good faith changed after the 2012 and 2015 acts?
Previously the proposer had to disclose all information a prudent insurer may wish to know
How does the Marine Insurance Act 1906 define material fact?
Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium or determining whether to take the risk
How would you summarise the changes in the Consumer Insurance Act 2012 and Insurance Act 2015?
They moved the responsibility from the proposer to provide the answers to the right questions to the insurer, to ask the right questions.
Define ‘material circumstances’ for non consumers
A circumstance 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
What does section 7 of the insurance act continue to say?
Misrepresentation of material circumstance only counts if any incorrect representation would affect an insurers decision to take the risk
What is a vulnerable customer?
Someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care
What does the FCA’s 2021 guidance on vulnerable customers focus on?
Understanding their needs, the skill of the staff, and how firms can take action.
What is the key difference between the consumer insurance act 2012 and the insurance act 2015?
The latter also makes provisions for non-consumers (ie commercial risks)
What is the main difference between consumers and non consumers?
Non consumers still need to disclose relevant information, even if the insurer does not ask for it.
What is contracting out?
When parties agree the Insurance Act 2015 will not apply, and therefore the previous law, such as Marine Insurance Act 1906, will apply.
Define ‘fair presentation’
Presenting the facts correctly from when negotiations begin through to the expiry of the policy
How can policy wordings change the duty of fair presentation?
Can require continuous disclosure of circumstances that change in the policy
What must insurers do at the mid term of a policy, regarding the duty of fair presentation?
Under 2012 Act ask if the d at wild provided at the inception of the policy are still accurate and explain the significance of misrepresentation
How does the duty of fair presentation exist in a claims scenario?
the insured must accurately represent what their loss scenario was.
What are two ways the duty of fair presentation can be breached?
Non-disclosure, and misrepresentation
What can an insurer do if a consumer breached duty of fair presentation?
If it was deliberate or reckless breach, the insurer can avoid the policy. If it was careless, they can alter the terms or reduce the proportional amount paid for a claim.
Under the insurance act 2015, when do insurers have a remedy against non consumer breach of fair representation?
If the insured has breached the duty of fair representation, and the insured can show the breach resulted in them entering a contract they wouldn’t have otherwise
What are the remedies for non-consumer breaches of the duty of fair representation?
If the breach is deliberate or reckless, insurers can void the policy and keep the premium. If it is not deliberate or reckless, the insurer can change the terms to match what they would have written, or void the policy and return the premium.
Define ‘perils’
That which gives rise to a loss
