Chapter 5 - Part 1 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 contract replacing utmost good faith
Who does the duty of good faith apply too?
Both insured and insurer
What does good faith mean within and insurance contract setting?
That disclosure must be made in a reasonably clear and accessible manner, and material representations of fact, expectation or belief must be ‘substantially correct’
What duty of disclosure does the proposer have?
Duty to disclose all material circumstances about the risk to the insurer.
How must the insurer act in good faith with the proposer?
They cannot introduce new non-standard terms that were not discussed at the negotiation stage. Cannot withhold facts about discounts such as if they have an alarm there home insurance premium may be reduced.
What definition from the Marine Insurance Act 1906 (MIA 1906) in relation to the duty of disclosure/material facts is still relevant today?
Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk.
What is duty of disclosure?
In all insurance negotiations there is a duty to disclose all material circumstances, in particular 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.
What does CIDRA stand for?
Consumer Insurance (Disclosure and Representations) Act 2012
CIDRA removes the common law duty on consumers to disclose any information that a prudent underwriter would consider material and replaces this with a duty to what?
Take reasonable care not to make a misrepresentation
Who does the CIDRA 2012 apply to?
Consumers not commercial customers.
What defines as a consumer under the CIDRA 2012 act?
Someone who takes out insurance wholly and unrelated to the individuals trade, business or profession.
What does IA 2015 stand for?
Insurance Act 2015
Does the Insurance Act 2015 extend the legislation in the CIDRA or override it?
Extend
Who does the Insurance Act 2015 apply to?
Non-Consumer ie commercial customers
What must insureds disclose under the IA 2015? (4)
- Material circumstances the insured knows or ought to know
- Disclosure in a manner which would be reasonably clear and accessible to insurers
- Facts substantially correct
- Representations of belief made in good faith
Who does the onus shift to under the insurance act? Insurer or Insured?
It shifts from the insured to the insurer.
Insurer is assumed to know information that would be expected of it.
Insurers, therefore, have to take responsibility for asking questions and probing for information about a risk.
What does an individual insured know? (2)
- What is known the them as an individual
- What is known to one or more of the individuals who are responsible for their insurance
An Insurer ought to know something only if…? (2)
- An Employee/agent of the insurer knows it
- The relevant information is held by the insurer and is readily available to an individual making the decision on the risk.
Under CIDRA, an intermediary is to be considered to be the insurer’s agent under what circumstances? (3)
- They are the AR of the insurer
- They collect information from the consumer with express authority from the insurer
- They have authority to bind the insurer to cover and do so.
What was outlawed in the insurance act 2015?
The basis of contract clause
Ensuring that statements made are true: misleading an insured about policy cover is a breach of good faith is shown in which court case?
Kettlewell v. Refuge Assurance Company (1909).
To whom does the principle of duty of disclosure apply in contracts of insurance?
Both the insurer and proposer.
What do the FCA rules require insurers and intermediate to provide about the contract prior to its conclusion?
Sufficient information in order for the prospective customer to make an informed decision.
Under both common law and recent law reforms when does the duty of disclosure start and end?
When negotiations begin and ends when the contract is formed/inception of a policy.
If the value of a property increases mid term or a car is sold mid term, is the insured required to inform the insurer?
Yes as the this will affect the policy and it will need amending/ a specific endorsement in place to accommodate the change in risk.
When would the insured need to disclose a conviction of fraud or a speeding conviction to there insurer providing there is no specific conditions in place relating to this?
At renewal - it does not need to be disclosed mid-term.
Why do general insurance policy’s differ from long term policies/ contracts (eg. life insurance)?
General insurance policy’s are terminated after the term - usually a year - and if renewal is accepted a new contract is formed. Life insurance typically ends when you pass away, the contract is not re-formed annually.
Therefore, facts need to be declared each year at renewal for general policies but not for life policies.
eg. if you get cancer you do not need to inform your life insurance provider.
What are the duty of disclosure rules in regards to life and pension policys?
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.
eg. a deterioration in health does not need to be disclosed in a life insurance policy after inception.
What policies generally have a continuing requirement of duty of disclosure?
Commercial property, motor insurance, public liability policy’s.
Why do
1. commercial property insurance
2. Motor insurance
3. Public Liability Insurance
policy’s require a continuing disclosure to the insurer?
Conditions written into the wording require continuing disclosure for set reasons as it change in the terms of the insurance may eb required.
- Disclose removal to another location or circumstances that change the risk.
- Any material changes must be disclosed - eg - new car, more miles, business use now needed.
- Any changes in activities to ensure they are covered.
What happens if the consumer does not provide material circumstances to a question asked by the insurer (eg leaving it blank on a proposal form) and the insurer does not follow up on this?
The insurer has waived their right to the information and cannot claim there has been a breach of disclosure.
A question on a proposal form asks the proposer for details of previous losses within the last five years. The proposer answers the question by saying ‘see your records’. Would the insurers have a right to decline to pay a claim if the records, which they had not
consulted, subsequently showed a claim within the five-year period?
No.
What does Ab Initio mean?
From the begining
Can an insurer give a 7 day cancelation period on a policy when they discover there has been a non-disclosure?
They can but they have then waived there rights to void the policy on the grounds on non-disclosure which could leave them liable for a claim prior to the cancelation.
What are the two categories of hazard?
Physical and Moral
Which case ridiculed the insurer’s suggestion that the fact the proposer was caught steeling apples age was a material fact to disclose in an insurance aplication?
Roselodge v. Castle (1966)
What 5 types if circumstances to not need to be disclosed according to the Insurance Act 2015? -
Information:
- that lessens the risk (EG. CCTV)
- the insurers already know
- the insurer ought to know (EG KNOWN MY INSURER/AGENT, NOT PASSED TO UNDERWRITER)
- the insurer is presumed to know (EG ONGOING WAR)
- waived by the insurer (EG A PROP NOT FILLED IN CORRECTLY, INSURER HAS NOT CHASED UP ON IT)
