CII IF1 Chapter 5 Flashcards
what must parties to a contract do before the contract comes into place?
Volunteer all material information
Who does the principle of upmost good faith apply to?
Both the insured and the insurer
When is duty of disclosure most important?
At proposal stage, before the contract comes into existence
What is material circumstance?
Every Circumstance is material which would influence the judgement of the insurer in fixing the premium or determining whether they will take the risk.
What is a consumer under the CIDRA ACT?
Someone who takes out insurance wholly or mainly for purposes unrelated to their trade, business or profession.`
Who does the Consumers Insurance Disclosure and Representations Act 2012 relate to?
Consumers
What does the CIDRA act do?
Replaces the need for duty of disclosure with a duty to take reasonable care not to make a misrepresentation
Which act extends the CIDRA act for non consumers
Insurance Act 2015
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?
It would investigate and settle the claim in accordance with the policy terms and conditions.
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
his past claims record.
Chloe has a life insurance policy and Mark has a motor insurance policy. How does their duty of disclosure differ?
Only Mark is obliged to disclose material facts on a ongoing basis.
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?
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.
Under the Consumer Insurance [Disclosure and Representations] Act 2012, when determining whether a proposer has misrepresented material facts, the principle adopted is one of:
reasonableness.
Under the Consumer Insurance [Disclosure and Representations] Act 2012, someone applying for a personal insurance policy is obliged to what?
Take reasonable care to answer the insurer’s questions fully and accurately.
When arranging insurance, what does the insurer need to do to comply with the principle of good faith?
It can only introduce non-standard terms if they are previously agreed.
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?
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?
When applying for fire insurance, what material circumstances would a proposer need to disclose?
Details of the heating and electrical system.
When arranging an insurance policy, who is subject to the duty of disclosure?
Both the proposer and insurer.
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.
As a consumer, Tanya is only required to take reasonable care to answer any questions asked by the insurer. Her policy would be valid.
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?
Accept the claim.
Why does the FCA require insurers to provide sufficient information about the contract before its conclusion?
So customers can make an informed decision whether to buy or not
When does the duty of disclose start and conclude usually?
Starts when the negotiation begins and ends when the contract is formed, unless otherwise stated
Do long term policies like life and pensions have continuing duty of disclosure
No, after the initial negotiations if the contract is agreed, the duty of disclosure ceases
What is the calculation for claim “reduction proportion”
Amount charged % by amount should of charged X 100 = percentage of claim to be paid
What can an insurer do if the insured deliberately doesn’t disclose information?
Refuse to pay the claim and retain all premiums
What is a custodial sentence
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.
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
2 years + sentence
4 years + sentence
7 years + sentence
Never spent
