Chapter 8 - Material Circumstances

Question 1

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

Answer 1

A) hazard
B) peril
C) hazard
D) peril

Question 2

What 2 things would effect the judgement of a prudent insurer in considering

Answer 2

A) whether or not to accept the risk

B) if willing to accept the risk; at what premium and on what terms and conditions

Question 3

Consumer. The proposer has a duty to:

Answer 3

take reasonable care not to make a misrepresentation

Question 4

No consumer. The proposer has a duty to:

Answer 4

Make a fair presentation of information relating to the risk of the insured

Question 5

Which 6 things do not need to be disclosed:

Answer 5

1. Circumstances that lessen the risk
2. Circumstances that the insurer knows
3. Circumstances the insurer ought to know
4. Circumstances the insurer is presumed to know
5. Circumstances where the insurer has waived its rights
6. Circumstances that a survey would have revealed

Question 6

What does the rehabilitation of offenders act 1974 as amended by the legal aid, sentencing and punishment of offenders act 2012 mean:

Answer 6

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

Question 7

What are the following rehabilitation period for custodial sentence 0-6 months

Answer 7

Length of sentence+ 2 years

Question 8

What are the following rehabilitation period for custodial sentence 6-30 months

Answer 8

Length of sentence+ 4 years

Question 9

What are the following rehabilitation period for custodial sentence 30months - 4 years

Answer 9

Length of sentence+ 7 years

Question 10

What are the following rehabilitation period for custodial sentence over 4 years

Answer 10

Never spent

Question 11

What are the following rehabilitation period for non custodial sentence community order and youth rehabilitation.

Answer 11

Length of sentence+ 1 year

Question 12

What are the following rehabilitation period for non custodial sentence fine

Answer 12

Length of sentence+ 1 year from date of conviction

Question 13

What are the following rehabilitation period for non custodial sentence conditional charge

Answer 13

Period of the order

Question 14

Disclosure of private individuals is covered by what

Answer 14

The Cidra

Question 15

What is the CIDRA

Answer 15

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

Question 16

Under CIDRA what happens if the misrepresentation was honest and reasonable

Answer 16

The insurer must pay the claim

Question 17

Under CIDRA what happens if the misrepresentation was careless

Answer 17

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

Question 18

Under CIDRA what happens if the misrepresentation was deliberate or reckless

Answer 18

The insurer is entitled to treat the policy as void and decline all claims

Question 19

What is the Insurance Act 2015

Answer 19

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

Question 20

Under the insurance act.. What should the insured know

Answer 20

A) knowledge held by the insureds senior management

B)what ought to be known

Question 21

Under the insurance act what info should the insurer be able to find within its own organisation

Answer 21

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

Question 22

Under insurance act what is a qualifying breach

Answer 22

Where the insurer would not have entered into the contract at all or would have done it under different terms

Question 23

Under insurance act if the breach is deliberate or reckless what can the insurer do:

Answer 23

A) avoid th contact and refuse to pay the claims

B) need not return any of the premiums paid

Question 24

Under the insurance act what happens if the breach was not deliberate or reckless

Answer 24

1. If the insurer wouldn’t have written the risk at all they can void the contract but must return the period paid
2. If thy would’ve charged a higher premium it can proportionality reduce any claims payments
3. If they would’ve added special terms they can but the insurer can’t seek to avoid the policy

Question 25

What is a peril

Answer 25

The event giving rise to the loss itself

Question 26

What is a hazard

Answer 26

The factor that might alter the frequency and severity of the peril occurring

Question 27

What is a physical hazard

Answer 27

Relates the the physical characteristics of the risk

Question 28

What are the physical hazards for fire insurance

Answer 28

A) construction of the building B) provision of fire fighting equipment C)trade processes

Question 29

What are the physical hazards for theft insurance

Answer 29

A) construction of the building B) security feature C) contents in the building

Question 30

What are the physical hazards for motor

Answer 30

A)age of the driver B)make and model of the vehicle C) place it’s kept D)the use of th vehicle

Question 31

What are the physical hazards for EL

Answer 31

Industrial processed in a factory ie guarding of machinery

Question 32

What are the physical hazards for personal accident and sickness

Answer 32

A) proposers occupation | B) dangerous pastimes

Question 33

What is a moral hazard

Answer 33

It relates to the human aspects that may influence the outcome of the risk

Question 34

Name the most serious example of poor moral hazard

Answer 34

False or exaggerated claims

Question 35

What is a common example of poor moral hazard

Answer 35

Lack of care of the insured ie lack of regard for employees or physical property

Question 36

Why do insurers use proposal forms

Answer 36

It is the most convenient, speedy and cost effective way

Question 37

What are the 6 general questions on a proposal for.

Answer 37

``` A) name B) address C) occupation D) age E) details of past insurance F)details of other insurances ```

Question 38

What specific 4 things are needed to quote on a proposal form

Answer 38

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)

Question 39

What are specific questions that are risk specific for Motor

Answer 39

Age of driver | Criminal prosecutions

Question 40

What are specific questions that are risk specific for Liability

Answer 40

Noise risks Pollution hazards Work away from the premises Contracts entered into

Question 41

What are specific questions that are risk specific for fire

Answer 41

Manufacturing process Storage arrangements Building construction

Question 42

What are specific questions that are risk specific for Theft

Answer 42

Breakdown of types of stock | Security precautions

Question 43

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

Answer 43

it’s convenient and cost effective

Question 44

To obtain material information what do surveys do

Answer 44

For larger risks for example a large manufacturing plant Risk surveyors acts as eyes and ears of th underwriters

Question 45

To obtain material information what are supplementary questionnaires

Answer 45

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

Question 46

What is a Market reform contract

Answer 46

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

Question 47

What are the three elements of the market reform contract

Answer 47

Meetings with client - usual in commercial Writing to the proposer- personal Internet search

Question 48

What is the definition of the term material circumstances

Answer 48

What would effect the judgement of a prudent underwriter

Question 49

What is the purpose of a proposal form

Answer 49

To gather all material facts for deciding on acceptance and terms for the risk