Chapter 5 - Part 2

Question 1

Which act is the definition of material fact found?

Answer 1

Marine Insurance Act 1906

Question 2

What are some examples of physical hazards?

Answer 2

Construction, nature of use, heating, electrical systems

Question 3

What are some examples of moral hazards?

Answer 3

Criminal convictions, lack of good management, excessive, careless, IVa’s/poor financial health

Question 4

What does the Insurance Act 2015 state about material circumstances?

Answer 4

A circumstance or representation is material if it would influence the judgment of a prudent insurer in determining whether to take the risk and if so, on what terms

Question 5

What does LASPO stand for?

Answer 5

Legal Aid, Sentencing and Punishment of Offenders Act 2012

Question 6

Which act did the Legal aid, Sentencing and Punishment of Offenders act 2012 amend?

Answer 6

Rehabilitation of Offenders Act 1974

Question 7

What did the Legal Aid, Sentencing and Punishment of Offenders Act 2012 change?

Answer 7

The rehabilitation periods now contains a buffer period after a custodial sentence.

Question 8

What is the buffer period for a sentence length of 0-6 months?

Answer 8

2 years

Question 9

What is the buffer period for a sentence length of 6-30 months?

Answer 9

4 years

Question 10

What is the buffer period for a sentence length of 30 months - 4 years?

Answer 10

7 years

Question 11

What is the buffer period for a sentence length of over 4 years?

Answer 11

Never “spent”

Question 12

What is the buffer period for a Community order & Youth rehabilitation order ?

Answer 12

1 year

Question 13

What is the buffer period for a fine?

Answer 13

1 year (from date of conviction)

Question 14

What is the buffer period for Conditional discharge, referral order etc.?

Answer 14

Period of order

Question 15

When does the buffer period begin?

Answer 15

from the end of the sentence

Question 16

Are any claims payable if a policy is Ab Inito?

Answer 16

No claims will be payable

Question 17

True of false - Non-negligent misrepresentation of a material circumstance by a consumer will be considered unreasonable grounds for refusing to pay a claim.

Answer 17

True

Question 18

Would a claim be paid out for theft if the proposer told the insurer prior to inception that the premises are protected by a burglar alarm when they are not?

Answer 18

Most likely no as this is a clear misrepresentation based on a fact not an opinion.

Question 19

What does CIDRA stand for?

Answer 19

Consumer Insurance (Disclosure and Representations) Act 2012

Question 20

What would qualify as a qualifying misrepresentation by the consumer?

Answer 20

If the representation in deliberate or reckless or careless and the consumer knew that is was untrue or misleading and knew that the matter to which the misrepresentation related was relevant to the insurer

Question 21

What will the insurer do if a qualifying representation is found to be deliberate or reckless?

Answer 21

They may avoid the contract and refuse all claims; and can keep any premiums paid, unless it would be unfair to the consumer to retain them.

Question 22

When is a qualifying misrepresentation careless?

Answer 22

If it is not deliberate or reckless

Question 23

What will an insurer do if a qualifying misrepresentation is found to be careless?

Answer 23

then the insurer will be able to apply a compensatory remedy. This would be based on what the insurer would have
done if it had known the correct information, such as

applying a relevant exclusion,
refusing to offer terms at all
or applying an increased premium.

Question 24

What is the consequence of a breach of the duty of fair representation in a non-consumer contract?

Answer 24

Unless the insurer has contracted out of the duty to make a fair presentation of the risk an insurer will only be able to avoid a policy if the insured has made a deliberate or reckless breach. In other cases the insurer will have to respond more proportionately.

Question 25

What are the two category’s the trigger a qualifying breach?

Answer 25

• deliberate or reckless; or
• neither deliberate nor reckless.

Question 26

What happens if the insurer would not have entered into the contract at all and there was a breach that was not deliberate or reckless?

Answer 26

They can avoid it and refuse all claims – but they must return the premium.

Question 27

What happens if the insurer would still have entered into the contract but with different terms (not related to the premium) and there was a breach that was not deliberate or reckless?

Answer 27

Then the contract will be treated as if those terms applied unless the insurer chooses not to apply them

Question 28

What happens if the insurer would still have entered into the contract but with a higher premium and there was a breach that was not deliberate or reckless?

Answer 28

Claims can be reduced proportionally.

x = premium actually charged / higher premium ×100

Question 29

A motor insurer agreed to accept an insurance proposal for a risk where the proposer did
not disclose driving convictions as he mistakenly thought they were spent. The premium
charged was £590, but had the insurer known about the conviction the premium would
have been £720.
The insured’s vehicle was damaged, and he made a claim. The cost of repairs was £300.

How much would the insurer pay for the claim?

Answer 29

divide the premium charged (£590) by
the amount the premium should have been (£720) times 100.
This equals 81.94%.
So the adjusted claim amount is 81.94% of £300, or £245.82.

Question 30

IA 2015 refers to material terms as being terms of the contract which, if complied with, would tend to reduce the risk of one of more of what?

Answer 30

• particular kinds of loss;
• losses at a particular location; and
• losses at a particular time.

Question 31

What are the rules of disclosure in regards to compulsory motor insurance?

Answer 31

The insurer must pay compensation for injury and property damage for third party claims then claim back the amount from the insured.