Chapter 5 Flashcards
Principle of Good Faith
The insured must provide all correct information required. The insurer cannot change the non-standard terms without prior negotiation
Duty of Disclosure
The duty to disclose material circumstances. At each renewal the insured is required to inform the insurer of any changes.
Consumer Insurance
It is the duty of the insured to take reasonable care not make a misrepresentation. This only applies to personal lines insurance. Puts more responsibility on the insurer to ask the correct questions to get the information they need.
Insured duty of discourse - Non-consumer
Similar law applies that the utmost good faith rule has been reduce to give insured more rights in terms of coverage
Duty to make fair presentation
The insured must make to the insurer a fair presentation of the risk. The insured has less onus and the insurer should ask the right questions and only needs to present the information they know to be true. This applies before the contract of insurance is entered into.
Insured Knowledge
What should be available from a reasonable search of information available to the insured.
Insurer Knowledge
Can only be obtained from information from the insured or the relevant information is already held. They are presumed to know what is common knowledge and information they would reasonably be expected to know relating to the relevant field of insurance.
Agent
for non-consumer business you can be expected to be responsible for the fair presentation of risk if you are the insured’s agent. They are considered an agent of they are an appointed rep, collects information
Insurer’s duty of disclosure
They must notify the insured if they are eligible for a discount and to only take on risks the insurer is registered to accept.
FCA Rules
Consumers must take reasonable care to avoid misrepresentation, disclose all material circumstances, and answer insurers’ clear questions accurately to avoid potential consequences, including policy voidance.
Disclosure post-contract
Starts when the negotiations begins and ends when the contract is signed. Once the contract is signed there is no needs for the insured to contacted the insurer and inform them of any material facts until renewal - ie fraud.
Renewal Disclosure
Short term policies will have material changes considered at renewal. Long term life policies will not have considerations again, the policy is valid as long as the insured continues to pay the premium
Change of Endorsement
If a change is needed the duty of disclosure is revived.
Limitations of an insurers right to information
The proposer must still disclose any information which may be material - if this relates to a non-consumer customer
Physical Hazard
Fire, Motor, Theft ect.
Moral Hazard
Insurance History or personal history
Consequences of Misrepresentation
If the misrepresentation is deemed a reasonable mistake based on the type of insurance
contract and the clarity of the insurers’ questioning, then the insurer may have to pay a claim.
Remedies available
They can avoid and refuse all claims if the insured would not have entered into the contract having all information available. If they would have entered, but not on those terms then the terms would not apply.
Non-Deliberate breaches
Proportionate response is required. They must return the premium if they would not have entered into the contract or if they would have entered, but not on those terms then the terms would not apply. If they would of charged a higher premium they have the right to only pay on the % they agreed in the contract.
Reduce Proportionality
x = premium actually charged/higher premium *100
percentage times the claim amount.
Variations of Contracts
If the breach was deliberate the insured can put the policy on notice and retain the premium without paying for any claims. If the breach was not deliberate the insurer could return the premium or they can reduce the claim proportionally to reflect the higher premium they would of charged.
Breach of warranty
Insurers liability will be suspended at the time of breach until the breach is corrected.
