CII IF1 Chapter 5

Question 1

what must parties to a contract do before the contract comes into place?

Answer 1

Volunteer all material information

Question 2

Who does the principle of upmost good faith apply to?

Answer 2

Both the insured and the insurer

Question 3

When is duty of disclosure most important?

Answer 3

At proposal stage, before the contract comes into existence

Question 4

What is material circumstance?

Answer 4

Every Circumstance is material which would influence the judgement of the insurer in fixing the premium or determining whether they will take the risk.

Question 5

What is a consumer under the CIDRA ACT?

Answer 5

Someone who takes out insurance wholly or mainly for purposes unrelated to their trade, business or profession.`

Question 6

Who does the Consumers Insurance Disclosure and Representations Act 2012 relate to?

Answer 6

Consumers

Question 7

What does the CIDRA act do?

Answer 7

Replaces the need for duty of disclosure with a duty to take reasonable care not to make a misrepresentation

Question 8

Which act extends the CIDRA act for non consumers

Answer 8

Insurance Act 2015

Question 9

When applying for a building insurance policy, the applicant omitted to answer two questions. The insurer did not question this and put the policy on risk. If there was a later claim that related to these unanswered questions, what action is the insurer most likely to take?

Answer 9

It would investigate and settle the claim in accordance with the policy terms and conditions.

Question 10

Marcel has applied to take out buildings insurance but in the process of underwriting the risk the insurer has identified poor moral hazard. This is most likely to be in relation to what

Answer 10

his past claims record.

Question 11

Chloe has a life insurance policy and Mark has a motor insurance policy. How does their duty of disclosure differ?

Answer 11

Only Mark is obliged to disclose material facts on a ongoing basis.

Question 12

What action is an insurer most likely to take if an insured deliberately gave false information when applying for private motor insurance and was subsequently involved in an accident that damaged the car and caused third-party damage?

Answer 12

Damage to the car would not be covered but the third-party damage would be. The insurer would normally look to recover these costs from the insured.

Question 13

Under the Consumer Insurance [Disclosure and Representations] Act 2012, when determining whether a proposer has misrepresented material facts, the principle adopted is one of:

Answer 13

reasonableness.

Question 14

Under the Consumer Insurance [Disclosure and Representations] Act 2012, someone applying for a personal insurance policy is obliged to what?

Answer 14

Take reasonable care to answer the insurer’s questions fully and accurately.

Question 15

When arranging insurance, what does the insurer need to do to comply with the principle of good faith?

Answer 15

It can only introduce non-standard terms if they are previously agreed.

Question 16

What action is an insurer most likely to take if an application form is completed recklessly and there is a subsequent related claim for a non-consumer insurance?

Answer 16

What action is an insurer most likely to take if an application form is completed recklessly and there is a subsequent related claim for a non-consumer insurance?

Question 17

When applying for fire insurance, what material circumstances would a proposer need to disclose?

Answer 17

Details of the heating and electrical system.

Question 18

When arranging an insurance policy, who is subject to the duty of disclosure?

Answer 18

Both the proposer and insurer.

Question 19

Although Tanya fully answers the questions asked when completing her house insurance proposal form, she also has other relevant information that she does not provide because she has not been asked to. What happens if this information then becomes known after she has taken the policy out?

a. As a consumer, Tanya is only required to take reasonable care to answer any questions asked by the insurer. Her policy would be valid.

b. Under the duty of disclosure, Tanya must disclose all material facts, whether asked to or not, but in most cases, the insurer would not void the policy.

c. As a consumer, Tanya must disclose all material facts whether asked or not. Her policy would be void from the date that the additional information becomes known.

d. Under the duty of disclosure, Tanya must disclose all material facts whether asked to or not. Her policy would be automatically void from inception.

Answer 19

As a consumer, Tanya is only required to take reasonable care to answer any questions asked by the insurer. Her policy would be valid.

Question 20

If a policyholder innocently omits a material fact when they proposed for a personal insurance policy and this subsequently comes to light when a claim is made, what action is the insurer likely to take?

Answer 20

Accept the claim.

Question 21

Why does the FCA require insurers to provide sufficient information about the contract before its conclusion?

Answer 21

So customers can make an informed decision whether to buy or not

Question 22

When does the duty of disclose start and conclude usually?

Answer 22

Starts when the negotiation begins and ends when the contract is formed, unless otherwise stated

Question 23

Do long term policies like life and pensions have continuing duty of disclosure

Answer 23

No, after the initial negotiations if the contract is agreed, the duty of disclosure ceases

Question 24

What is the calculation for claim “reduction proportion”

Answer 24

Amount charged % by amount should of charged X 100 = percentage of claim to be paid

Question 25

What can an insurer do if the insured deliberately doesn’t disclose information?

Answer 25

Refuse to pay the claim and retain all premiums

Question 26

What is a custodial sentence

Answer 26

A custodial sentence is a judicial sentence, imposing a punishment consisting of mandatory custody of the convict, either in prison or in some other closed therapeutic or educational institution, such as a reformatory, psychiatry or drug detoxification.

Question 27

If someone has been in prison for the following years how long is their rehabilitation period?
0-6 months
6-30 months
30 months-4 years
+4 years

Answer 27

2 years + sentence
4 years + sentence
7 years + sentence
Never spent