Chapter 8 - Material Circumstances Flashcards
Identify from the following which are perils and those which are hazards:
A) high value sports car
B) explosion
C) thatched roof for fire insurance
D) subsidence
A) hazard
B) peril
C) hazard
D) peril
What 2 things would effect the judgement of a prudent insurer in considering
A) whether or not to accept the risk
B) if willing to accept the risk; at what premium and on what terms and conditions
Consumer. The proposer has a duty to:
take reasonable care not to make a misrepresentation
No consumer. The proposer has a duty to:
Make a fair presentation of information relating to the risk of the insured
Which 6 things do not need to be disclosed:
- Circumstances that lessen the risk
- Circumstances that the insurer knows
- Circumstances the insurer ought to know
- Circumstances the insurer is presumed to know
- Circumstances where the insurer has waived its rights
- Circumstances that a survey would have revealed
What does the rehabilitation of offenders act 1974 as amended by the legal aid, sentencing and punishment of offenders act 2012 mean:
Depending on the period of time and upon the severity of the original sentence imposed convictions become spent and don’t need to be disclosed.
They are halved for those below 18 yrs of age at the DATE of the conviction except for custodial sentences of up to 6 months where the buffer period is 18 months
What are the following rehabilitation period for custodial sentence 0-6 months
Length of sentence+ 2 years
What are the following rehabilitation period for custodial sentence 6-30 months
Length of sentence+ 4 years
What are the following rehabilitation period for custodial sentence 30months - 4 years
Length of sentence+ 7 years
What are the following rehabilitation period for custodial sentence over 4 years
Never spent
What are the following rehabilitation period for non custodial sentence community order and youth rehabilitation.
Length of sentence+ 1 year
What are the following rehabilitation period for non custodial sentence fine
Length of sentence+ 1 year from date of conviction
What are the following rehabilitation period for non custodial sentence conditional charge
Period of the order
Disclosure of private individuals is covered by what
The Cidra
What is the CIDRA
Consumers are required to take legal care not to make a misrepresentation and the emphasis is on the insurer to ask the right questions in a clear way
Under CIDRA what happens if the misrepresentation was honest and reasonable
The insurer must pay the claim
Under CIDRA what happens if the misrepresentation was careless
The insurer can act as it would have done if the question had been answered correctly. I.e charge a higher premium, apply exclusion etc
Under CIDRA what happens if the misrepresentation was deliberate or reckless
The insurer is entitled to treat the policy as void and decline all claims
What is the Insurance Act 2015
To make a fair presentation of the risk involves disclosing every material circumstance which the insured knows or ought to know. Also makings fair presentation also means insurers need to take responsibility for asking questions and probing for info
Under the insurance act.. What should the insured know
A) knowledge held by the insureds senior management
B)what ought to be known
Under the insurance act what info should the insurer be able to find within its own organisation
A) info held by the insurer and accessible to the underwriter
B) what an underwriter would be reasonably expected to know
C) that is common knowledge
Under insurance act what is a qualifying breach
Where the insurer would not have entered into the contract at all or would have done it under different terms
Under insurance act if the breach is deliberate or reckless what can the insurer do:
A) avoid th contact and refuse to pay the claims
B) need not return any of the premiums paid
Under the insurance act what happens if the breach was not deliberate or reckless
- If the insurer wouldn’t have written the risk at all they can void the contract but must return the period paid
- If thy would’ve charged a higher premium it can proportionality reduce any claims payments
- If they would’ve added special terms they can but the insurer can’t seek to avoid the policy
What is a peril
The event giving rise to the loss itself
What is a hazard
The factor that might alter the frequency and severity of the peril occurring
What is a physical hazard
Relates the the physical characteristics of the risk
What are the physical hazards for fire insurance
A) construction of the building
B) provision of fire fighting equipment
C)trade processes
What are the physical hazards for theft insurance
A) construction of the building
B) security feature
C) contents in the building
What are the physical hazards for motor
A)age of the driver
B)make and model of the vehicle
C) place it’s kept
D)the use of th vehicle
What are the physical hazards for EL
Industrial processed in a factory ie guarding of machinery
What are the physical hazards for personal accident and sickness
A) proposers occupation
B) dangerous pastimes
What is a moral hazard
It relates to the human aspects that may influence the outcome of the risk
Name the most serious example of poor moral hazard
False or exaggerated claims
What is a common example of poor moral hazard
Lack of care of the insured ie lack of regard for employees or physical property
Why do insurers use proposal forms
It is the most convenient, speedy and cost effective way
What are the 6 general questions on a proposal for.
A) name B) address C) occupation D) age E) details of past insurance F)details of other insurances
What specific 4 things are needed to quote on a proposal form
Detail of previous claims
Period of insurance
Subject matter of the insurance
Sum insured ( the rate the premium is based on- a rate per cent £100 or per Mille £1,000)
What are specific questions that are risk specific for Motor
Age of driver
Criminal prosecutions
What are specific questions that are risk specific for Liability
Noise risks
Pollution hazards
Work away from the premises
Contracts entered into
What are specific questions that are risk specific for fire
Manufacturing process
Storage arrangements
Building construction
What are specific questions that are risk specific for Theft
Breakdown of types of stock
Security precautions
Proposal forms are used by underwriters as a means of obtaining material facts because:
A) it is regulatory requirement
B)it’s convenient and cost effective
C)it prevents misrepresentation by the proposer
D) it provides an opportunity for collecting product W design information
it’s convenient and cost effective
To obtain material information what do surveys do
For larger risks for example a large manufacturing plant
Risk surveyors acts as eyes and ears of th underwriters
To obtain material information what are supplementary questionnaires
Popular with dealing with particular aspects of risk:
PL- hairdressers using hair dying etc
Product- involving safety equipment of fire prevention equipment
Money- involving very high value transits
Fire- for old or obsolete buildings
What is a Market reform contract
Carries full details of the risk in a recognised format and is often used in London market
Originally part of the slip used at Lloyd’s
What are the three elements of the market reform contract
Meetings with client - usual in commercial
Writing to the proposer- personal
Internet search
What is the definition of the term material circumstances
What would effect the judgement of a prudent underwriter
What is the purpose of a proposal form
To gather all material facts for deciding on acceptance and terms for the risk
