Chapter 5 - Good Faith Flashcards
What sort of product is insurance? Tangible or Intangible?
Intangible
What does the insurance act 2012 replace?
The duty of consumers to disclose material fact with a duty to take reasonable care not to make a misrepresentation
What does the insurance act 2015 introduce?
Duty to make fair presentation of a risk for a non-consumer contract
What is utmost good faith?
A positive duty to voluntarily disclose, accurately and fully all facts material to the risk, whether requested or not.
What must parties do before the contract comes into effect?
Volunteer material information in all negotiations
Who does utmost good faith apply too?
Both insured and insurer
What must the insurer disclose as an act of utmost good faith?
The insurer must not introduce non-standard terms that were not discussed during negotiations, they cannot withhold any discounts that are available for certain measures that improve a risk.
What is the duty of disclosure?
In all insurance negotiations there is a duty to disclose material facts, particularly at the proposal stage.
When is the duty of disclosure revived?
At each renewal date unless it is a continuing one.
What is the insureds duty of disclosure?
To make a full and complete disclosure of all material facts relating to the contract if they wish to ensure that in the event of a loss their claim is paid.
What is the insurers duty of disclosure?
They must notify an insured of a possible entitlement to a premium discount, only take risks they are registered to accept, ensuring statements made are true.
Who does the Consumer insurance act 2012 apply to?
Consumers not commercial customers
What defines a Consumer under the act?
Someone who takes out insurance wholly unrelated to the individuals trade.
Who does the Insurance act 2015 apply to?
Non-consumer customers
What changes did the act make to the duty of fair presentation?
The insured must make the insurer a fair presentation of the risk.
What must the insured disclose under this act?
Every material fact the insured knows or ought to know , make the disclosure in a manner which could be reasonably clear and accessible, every material presentation to a matter of fact is correct.
Who does the onus shift to under this act?
It has shifted from the insured to the insurer, which is assumed to know information that would be expected of it.
What is a measure of the insured’s knowledge?
What is known to them as an individual, a non-individual knows only what is known to one or more of the individuals who are part of the senior management.
What is a measure of the insurers knowledge?
If the employee or agent of the insurer knows it and ought to have passed it on, the relevant information is held by the insurer and is readily available.
What is the insurer presumed to know?
Things which are common knowledge, things which an insurer offering insurance in that class of business would reasonably be expected to know.
What was outlawed in the insurance act 2015?
The basis of contract clause
What do you have to do to contract out under the insurance act 2015?
Take sufficient steps to draw the disadvantageous term to the insured’s attention
Clear and unambiguous
Under what law does the duty of disclosure end at inception?
Common law
What policies have a duty of disclosure start at renewal?
General (non-life) policies
What are the duty of disclosure rules in regards to life and pension policies?
The duty of disclosure ceases once the policy is in force, even if a material fact were to change it does not need to be declared.
What policies generally have a continuing requirement of duty of disclosure?
Commercial property
Motor insurances
public liability insurances.
Does the duty of disclosure revive on alteration of a policy?
Yes if there is a need for an endorsement to the policy.
What happens if the consumer does not provide material fact for a question asked by the insurer does not follow it up?
The Insurer has waived its right to the information and cannot claim there has been a breach of duty of disclosure.
What is meant by the term Ab Initio?
From the beginning
What is Estoppel?
This is a bar or impediment that precludes a person from asserting a fact or right.
What is the definition of material fact?
to encourage the proposer, if in any doubt about facts which may be material to disclose them.
Where is the definition of material fact found?
Marine Insurance act 1906
What are some examples of physical hazards?
Construction, nature of use, heating, electrical systems
What is a moral hazard?
Criminal convictions, lack of good management, excessive, willful carelessness
What does the Insurance Act 2015 state about material fact?
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
What facts do no require disclosure?
Facts of law, Facts of public knowledge, Facts that lessen the risk, facts where the insurer has waived it right, facts a survey should reveal, Facts that the insurer does not know.
What facts do not require disclosure in non-consumer policies?
Facts that diminish the risk, Facts the insurer knows, Facts the insurer ought to know, Facts the insurer is presumed to know, Facts that the insurer has waived its rights.
What did the Legal aid, Sentencing and punishment of offenders act 2012 (LASPO) change?
The rehabilitation period now contains a buffer period after the custodial sentence.
What is the buffer period of a sentence of 0 -6 months?
2 years
Buffer period for 6 - 30 months?
4 years
Buffer period for 30 months - 4 years?
7 years
Buffer period over 4 years?
Never spent
Buffer period for a non-custodial sentence such as fines or community orders?
1 year
Conditional discharge buffer?
Period of the order.
When would a insurer be able to claim the policy ab initio? in regards to duty of disclosure
If the insurer has followed up on a question that has not been provided with a material fact before inception.
Are any claims payable if a policy is Ab Initio?
No claims will be payable
What happens if the non-disclosure was fraudulent?
The insurer may keep the premium and sue for damages
What can the insurer not do?
Refuse payment of a particular claim, but leave the policy in force for the future.
What is the ICOBS?
Insurance conduct of business sourcebook
What does ICOBS stated about non-disclosure?
Rejection of a customers policy claim would be unreasonable unless there is evidence of fraud.
What is the FOS approach to non-disclosure?
Three stage questions
Was there a clear question and was it answered correctly?
Was the insurer induced?
What kind of non-disclosure was it?
Would an insurer be able to refuse a claim based of misrepresentation?
non-negligent misrepresentation of material fact by a consumer will be considered unreasonable grounds for refusing to pay a claim.
What happens if the proposer purposefully or recklessly answers questions wrong?
The insurer is entitled to avoid the policy ab initio.
What does the insurer have to do if they were misrepresented information but would have taken the policy on at a higher premium?
They are able to reduce the claim proportionately, meaning the insurer would only have to pay a certain percentage of the claim rather than the full amount.
What is the calculation for reducing proportionality?
premium actually charged / higher premium X 100
What is the calculation if the premium was less due to the misrepresentation of information?
Total premium actually charged / the original premium X 100
What are the rules of disclosure in regards to compulsory insurance?
The insurer must pay all claims of injury and property damage for the third party, then claim back the amount from the negligent insured.
