Chapter 3 Flashcards
What does a policy schedule usually contain?
All variable information concerning the insured, details of risks insured and which sections of policy are operative.
Do policy documents have to be worded clearly?
Yes - clear enough for consumers to understand them.
What is contra proferentem?
It applies by courts when policy wording is ambiguous
Can an insured dispute core terms of a contract?
No but they can complain if they are unclear or badly written
In an insurance policy what is a heading?
Includes the name of the insurer
What is a preamble and what is it also known as?
It sets the scene and refers to insured/insurer forming a contract and offering indemnity in return for a premium.
A recital clause
What will often be below the preamble?
A signature or stamp.
It comes from the time when policies were prepared by hand.
What is the operative clause and why is the arguably the most important part of the contract?
It’s also called the insuring clause and this is where the actual cover is outlined «Eg. Axa agrees to indemnify the insured against claims made during the policy period «
Are exceptions and exclusions the same thing?
Yes
What is the difference between express and implied conditions?
Express conditions are always stated
Implied conditions are implied by common law and are not stated
What is the purpose of the policy schedule?
To make the policy specific to the insured
List some variable parts of the policy schedule.
- Insured’s name
- Insured’s address
- Policy period
- Premium
- Details of the subject matter
- Location of the risk
- Sum insured or limit of liability
- Policy number
- Reference to special exclusions, conditions or aspects of cover
- Operative sections of the policy
What types of information might be included in the ‘Information and facilities’ section of a policy?
- Definitions
- Customer service standards statement
- Complaints procedure
- Claims information
True or False: Definitions in an insurance policy only apply if the word begins with a lowercase letter.
False
The definition will apply only if the word begins with a capital letter or is formatted in bold or italics.
What does a customer service standards statement provide?
Expected response times from the insurer
This statement informs policyholders about the level of service they can expect.
What should a policyholder do if their complaint is not resolved satisfactorily?
Refer to the Association of British Insurers and/or the Financial Ombudsman Services
Fill in the blank: The Ombudsman asks firms to try and resolve complaints within ______ weeks of the first complaint.
eight
What is typically found in the claims information section of a motor insurance policy?
‘What to do?’ in the event of a motor accident
What is a Freephone claims service?
A service provided for reporting claims without charge
What are the 8 main things a policy will include
- heading;
2 • preamble;
3 • signature clause;
4 . operative clause;
§ . exclusions/exceptions;
6 . conditions;
7 . policy schedule; and
8 • information and facilities
What is the difference between general and specific exclusions?
General exclusions apply to all sections of the policy
Specific exclusions only apply to parts of the policy
Why is war a fundamental risk?
It’s too serious to be insured by an insurance company. The damage would be to widespread.
Is radioactive contamination a fundamental risk?
Yes - usually! Potentially losses are considered beyond the capacity of normal insurers. Specialist pools of insurers may cover nuclear installations however.
Why is terrorism now generally excluded?
Following major terrorist attacks in London and 9/11 it was clear that significant terrorist attacks could happen from unexpected/insured perils like aircraft’s.
What was Pool Re?
A government company set up to deal with commercial property cover for terror attacks.
It is now a re-insurer of terrorism cover. Following the Manchester bombings and London Bridge attack, it extended its cover it BI. (Not just physical property damage.)
How does the insurance industry cover terrorism cover now?
The insured can purchase it separately and buy it as additional cover. Premium rates are now decided by individual insurers.
Name two other risks that are excluded as standard in property insurance.
- Pollution / Contamination
- Sonic Bangs
What are conditions (expressed or implied)
Conditions are terms written into the policy that have to be adhered to by the insured for cover to be valid. They imposed obligations onto the insured.
What is the condition ‘duties of the insured?’
The insured must observe and fulfil all terms of the policy.
What is the condition of alteration?
Insured has a continuing duty to notify insurers of any changes to the risk.
What is the condition ‘action of the insured in the event of a claim?’
The insurer may stipulate a specific timeline/method any claim needs to be notified in.
What is the condition of fraud?
If a claim is in anyway fraudulent, it won’t be covered.
What is the condition of reasonable precautions and why is it often not valid in court?
The insured has a duty to take reasonable care not to cause a claim due to carelessness. Courts often see this as a way for insurers to try and get out of paying claims.
What is the condition of contribution?
If there is dual insurance in place, insurers can call on other insurers to pay towards part of the claim costs.
What is the condition of subrogation?
Insurers can recover costs from third parties if they are responsible or party responsible for the loss on the behalf of the insured.
What is the condition of average?
The amount insurers have to pay to the insured in the event of a claim is less if there is underinsurance.
What is the condition of arbitration?
It concerns quantum disputes.
Is there a condition of cancellation?
Yes! Often there is, which sets out when the insured or insurers can cancel cover.
What are warranties?
Promises made by the insured to do something / not do something.
What is an example of a warranty in marine insurance?
A promise to not travel to certain parts of the world.
What 3 outcomes can happen if a warranty to breached in a non-consumer contract?
- The cover could be waived ab initio
- The breach could waived
- The cover could be suspended and incepted again once the breach has been remedied
Do warranties have to strictly complied with and do they have to be written into policy?
Yes and yes!
What is a condition precedent to the contract?
A term that must be fulfilled prior to the formation of the contract itself.
What is a condition subsequent to the contract?
It must be complied with once the contract is in force.
What is a condition precedent to liability?
A term that must be complied with for a claim to be valid.
What is a representation?
Written or oral statements made during the negotiations for the contract.
Does representation need to be accurate and does it appear in the policy?
Yes and no.
What happens if an insured breaches a condition subsequent to the contract?
Insurers may be able to avoid cover.
What happens if an insured breaches a condition precedent to liability?
The insurer can avoid the claim but not the whole contract/cover.
What is an excess?
The first amount of each claim for which the insured is responsible.
Who is the insurer for the value of the excess?
The insured!
What is a compulsory and voluntary excess?
A compulsory excess is fixed by the insurer. A voluntary excess is accepted by the insured in return for a discount.
What is a deductible?
A very large excess.
What is a franchise? And give an example.
A fixed amount of time before a claim is valid/paid out. For example, in a PA policy often the illness must last 7 days or more before any claim is paid.
