Chapter 5 - Good Faith & Disclosure

Question 1

Which of the following statement in respect of the insurance act 2015 is UNTRUE?

• The act gives insurers, the ability to include the basis of contract clause in its policies
• The act does not apply to consumers
• The act requires insureds to not make a misrepresentation
• The act requires the insured to perform a reasonable search for material circumstances

Answer 1

The act gives insurers the ability to include the basis of contract clause in its policies

Question 2

Under the consumer insurance (disclosure and representations) act 2012, I consumer applying for a personal insurance policy is obliged to:

• Make qualifying representations
• Fully disclose all relevant information known to the proposer
• Not act carelessly
• Take reasonable care to answer the insurers questions, fully and accurately

Answer 2

Take reasonable care to answer the insurers questions, fully and accurately

Question 3

A life insurance policy holder has suffered two strokes, but has not informed of the insurer of her change of health. This is because:

• The duty of a disclosure ends at interception of the policy.
• The duty of disclosure only applies at the policy renewal date.
• The duty of disclose never applies to life insurance contracts.
• Her health is not relevant information.

Answer 3

The duty of a disclosure ends at interception of the policy.

Question 4

Jeanette, a motor insurance policy holder, has been diagnosed with epilepsy. Is it TRUE to say that:

• As long as she was diagnosed after interception, she has no duty of disclosure.
• Her epilepsy is relevant information and she has a duty to disclose this to her insurer.
• it is her choice, whether she informed her insurer.
• She only has a duty of disclosure if directed to do so by her GP.

Answer 4

Her epilepsy is relevant information and she has a duty to disclose this to her insurer.

Question 5

Why might an insurer require continuing disclosure for public liability contracts?

• To ensure changes to business activity are notified.
• To ensure premiums can be increased.
• To avoid lengthy discussions at renewal.
• To identify opportunities for cross selling.

Answer 5

To ensure changes to business activity are notified.

Question 6

Susie has completed a proposal form for building and contents insurance. She has only provided partial information as she cannot recall full details of the claim she made last year. The insurer asks no further questions and the policy is put on risk. In this example:

• The policy is Noel and void, and any future claim will be refused
• Any claim may be reduced as a result of the missing information.
• Susie is considered to be in breach of contract.
• The insurer is deemed to have waived its rights regarding the missing information

Answer 6

The insurer is deemed to have waived its rights regarding the missing information

Question 7

Material circumstances are those which:

• Are important to a prudent underwriter in determine the nature of risk, this being determined at the sole discretion of the underwriter.
• Directly relate to the insurance policy.
• Influence the judgement of a prudent insurer and determine whether to take the risk, and if so, on what terms.
• Are relevant to the insurance policy, as determined by an average person of average intelligence.

Answer 7

Influence the judgement of a prudent insurer and determine whether to take the risk, and if so, on what terms.

Question 8

When applying for an insurance policy, the proposal is under an obligation to disclose any material circumstances. This would include:

• Matters of law
• Information which the insurer ought to know.
• Information that is outside the scope of the specific questions asked by the insurer.
• Details of the proposer’s circumstances that relate to the insurance being applied for.

Answer 8

Details of the proposer’s circumstances that relate to the insurance being applied for

Question 9

BB Insurance Ltd have received a claim on a buildings insurance policy where the insured had deliberately and fraudulently failed to disclose details of existing subsidence. Had this disclosed, insurance cover would not have been offered. As a result, BB insurance Ltd are MOST likely to:

• Refuse the claim, set the whole contract aside, and retain the premium.
• Pay the claim, and continue the policy, but refuse future claims relating to the subsidence.
• Refuse the claim, cancel the policy and refund the premiums paid.
• Play the claim and continue the policy as before.

Answer 9

Refuse the claim, set the whole contract aside, and retain the premium

Question 10

An insurance claim is settled, even though the insurer is aware that information had been fortunately misrepresented when applying for it. The type of insurance policy is MOST likely to be:

• Home contents insurance.
• Compulsory motor insurance.
• Building’s insurance.
• Medical expenses insurance.

Answer 10

Compulsory motor insurance

Question 11

An insurer is obliged to settle the claim, even though there was a breach of good faith at the outset of that, they had known, would have meant they otherwise would not have entered into the contract. This is because they would have received a claim:

• For personal injury with a compulsory excess.
• Where it is not possible to apportion blame.
• For third-party injury and property caused by moral hazard.
• For third-party injury and property made compulsory by statute.

Answer 11

For third-party injury and property made compulsory by statute