Chapter 7 - Policy Wording

Question 1

When does an insurance contract come into effect?

Answer 1

Once the proposer has paid, or agreed to pay, the premium

Question 2

FCA rules require that for commercial customers, a policy document must be issued when?

Answer 2

Promptly after the conclusion of the contract

Question 3

Who has produced a code of good practice (Principles and Guidance – Contract Certainty) which includes service standards for issuing insurance documents within good time?

Answer 3

The Association of British insurers ABI

Question 4

The ABI states that for commercial customers, “promptly” means what?

Answer 4

Within 30 calendar days of the inception date of the contract.

Question 5

Is the ABI code compulsory?

Answer 5

No - but all ABI members have agreed to abide by it.

Question 6

What is included in a policy wording heading?

Answer 6

The name of the insured
Address
Company logo

Question 7

What is a Recital Clause?

Answer 7

Sets the scene for what follows in the policy.
Refers to the two parties coming together to form a contract
Insured has agreed to pay XX if the insurer takes on the risk detailed in the policy.

Question 8

What is meant by signature?

Answer 8

A pre-printed signature of an official from the insurer is usually required but not a strict necessity.

Question 9

What is the Operative clauses?

Answer 9

Specifying in detail what is covered.

Question 10

What conditions do not need to appear in the policy to apply?

Answer 10

Ones implied by common law

Question 11

What is an express condition?

Answer 11

A condition stated in the policy wording and not specific to a policy.

Question 12

If a condition is specific to a policy, where would it be found?

Answer 12

In the operative clauses.

Question 13

If the cover required and agreed is wider than the operative clause, where would you find it?

Answer 13

In an extension.

Question 14

What is found under the information and facilities section?

Answer 14

Definitions
customer service standard statement
complaints procedure
claims information

Question 15

What is the main non pre-printed or standardized document?

Answer 15

Policy Schedule

Question 16

What are the three types of exclusion?

Answer 16

Specific
General
Market

Question 17

Where do specific, general and market exclusions apply?

Answer 17

Specific - to parts of the policy
General - all sections of the policy
Market - all insurance policies

Question 18

Why is war and related perils normally excluded

Answer 18

It is fundamental (applies to the community at large) so uninsurable
Its the states responsibility.

Question 19

What are the main common exclusions?

Answer 19

War
Radioactive/nuclear
Electronic/cyber
Pollution
Sonic bangs

Question 20

What does the condition “alteration” mean?

Answer 20

Extends the duty of disclosure.
The policyholder must instruct there insurer of any changes which may change the risk.

Question 21

What does the subrogation condition mean?

Answer 21

The insurer can take over the insureds rights when there is a claim to recover the loss from the TP.

Question 22

What does the arbitration condition mean?

Answer 22

This states that any disputes regarding the amount to be paid in settlement of a claim will be judged by an independent arbitrator. Arbitration is binding on all parties.

Question 23

What is a warranty?

Answer 23

A promise by the policy holder that something will be done, not done, that something is true or not true.

For example: promise to not have any flammable liquids, promise to take the rubbish out every day, the warehouse does have an alarm, there is no welding on the premises.

Question 24

How strict are warranties?

Answer 24

Very - they must be strictly and literally complied with for cover to be valid.

Question 25

If you breach a warranty however that breach does not cause the claim - are you covered?

Answer 25

Yes

Question 26

Under the IA 2015, what does a breach of waranty cause?

Answer 26

Temporarily suspends the insurers liability until the warranty is complied with. An insurer cant refuse to pay a claim unless the breach has cause or contributed to the claim.

Question 27

What does conditions precedent mean?

Answer 27

Conditions that must be done prior to binding.

Question 28

What would make a policy void?

Answer 28

An illegal contract No insurable interest A fundamental Mistake

Question 29

What type of breach will render a policy void ab initio or entitle the insurer to avoid the policy at its option?

Answer 29

A breach of a condition precedent to the contract can either render a policy void ab initio, or make it void at the insurer’s discretion (depending on the nature of the breach).

Question 30

What type of breach allows the insurer to avoid the policy from the date of the breach, provided there is a causal connection between the breach and the incident giving rise to its loss?

Answer 30

A breach of continuing condition permits the insurer to avoid the policy from the date of the breach, but only if there is a causal connection between the breach and the loss.

Question 31

What type of breach allows the insurer to avoid a particular claim, but not the policy as a whole?

Answer 31

A breach of a condition precedent to liability allows the insurer to avoid the claim concerned, but not to avoid the whole policy.

Question 32

If a proposer provides wrong information, even innocently, what is this called?

Answer 32

Misrepresentation

Question 33

If a misrepresentation relates to a material circumstance what does the insure have a right to do?

Answer 33

Avoid the policy - ab initio - from the beginning

Question 34

When must a certificate be issued?

Answer 34

When insurance is compulsory by law