Chapter 5 - Good Faith Flashcards
What sort of product is insurance? Tangible or Intangible?
Intangible
What duty do consumers have under the Consumer Insurance Disclosure & Representations Act 2012
Duty to take reasonable care not to make a misrepresentation
What did the Insurance Act 2015 introduce?
Duty to make fair presentation of a risk for a non-consumer contracts
Who does the duty of good faith apply too?
Both insured and insurer
What must the insurer disclose as an act of good faith?
Only taking on risks which the insurer is registered to accept
Ensuring statements are true and not misleading
Entitlement to discounts etc.
What is the duty of disclosure?
In all insurance negotiations there is a duty to disclose material circumstances, particularly at the proposal stage.
When is the duty of disclosure revived?
At each renewal date unless it is a continuing one.
If there is an alteration to the policy
Who does the Consumer Insurance Disclosure &Representations 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 i.e. commercial customers
What must the insured disclose under the insurance act?
Material circumstances the insured knows or ought to know
Disclosure in a manner which could be reasonably clear and accessible to insurers
Facts substantially correct, representations of belief made in good faith
What is a measure of the insured’s knowledge if they are an individual?
What is known to them as an individual
What individuals responsible for insurance know
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.
Common knowledge
What insurer of that class of insurance reasonably expected to know
What was outlawed in the Insurance act 2015?
The basis of contract clauses
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
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 circumstance or 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 eg an insurer being estopped from avoiding a contract for breach of good faith if they have acted on the basis that the contract is valid,
What are some examples of physical hazards?
Construction, nature of use, heating, electrical systems
What are some examples of moral hazards?
Criminal convictions, lack of good management, excessive, willful carelessness
What does the Insurance Act 2015 state about material circumstances?
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 not require disclosure?
Facts of law,
Facts of public knowledge
Facts that lessen the risk
Facts where the insurer has waived its right
Facts a survey should reveal
Facts that the insurer does not know.
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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.
Facts of law
Facts a survey should have revealed
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What did the Legal Aid, Sentencing and punishment of offenders act 2012 (LASPO) change?
The rehabilitation periods now contains a buffer period after the custodial sentence.
What is the buffer period of a prison 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.
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 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?
What does the Insurance Conduct of Business Sourcebook say about the rejection of claims?
Insurers must not unreasonably reject a claim
Non-negligent misrepresentation of material circumstances by a consumer will be considered unreasonable grounds for refusing to pay a claim.
What happens if the consumer 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?
Loss multiplied by premium actually charged / higher premium
What are the rules of disclosure in regards to compulsory motor insurance?
The insurer must pay compensation for injury and property damage for the third party, then claim back the amount from the insured.
What constitutes knowledge for non individual insureds
What senior management know or their insurance team know or what would be revealed by reasonable search
What those responsible for insurance know
