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CII > IF1.5 Good Faith and disclosure > Flashcards

IF1.5 Good Faith and disclosure Flashcards

1
Q

Define Good faith

A

Disclosure must be made in a reasonably clear and accessible manner.

Material representations of fact, expectation & belief must be correct (as far as you know)

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2
Q

Material circumstances

A

circumstances that underwriters need to know before accepting a particular risk

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3
Q

Why does good faith matter in insurance?

A

Insurance is intangible.
We have to trust the underwriter & the underwriter has to trust us.

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4
Q

Duties of the insurer when disclosing information

A
  1. only take risks they’re authorised to accept
  2. don’t withhold information about available discounts
  3. Ensure statements made regarding policy cover are true
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5
Q

Consumer Insurance (Disclosure and Representations) CIDRA 2012

A

In personal insurance, when disclosing facts you cannot misrepresent them. To do this underwriters must ask relevant questions (normally a generic set).

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6
Q

Marine Insurance Act 1906 (MIA 1906)

A

Customers must disclose all material information

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7
Q

Who does Consumer Insurance (Disclosure and Representations) CIDRA apply to?

A

Consumers, not Commercial

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8
Q

Consumer

A

Someone who takes out insurance for personal reasons

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9
Q

Insurance Act 2015 (IA 2015)

A

For commercial clients there are no standard set of questions. They have a duty to make fair presentation of any non-standard material circumstances.

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10
Q

Fair Presentation

A
  • disclose every material circumstance which the insured knows or ought to know
  • disclose in a clear manner
  • every material representation is correct
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11
Q

An insured individual should know

A
  • what they know
  • what is know to the individuals responsible for their insurance
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12
Q

An insurer should know

A
  • what the employees/agents know
  • the information held by the insurer
  • common knowledge
  • the area the they are offering insurance in
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13
Q

In common law a personal is responsible for the acts of…

A

their agent. Hence, a careless misrepresentation by an agent is treated as if it had been made by the principle.

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14
Q

An agent is defaultly an agent of the…

A

consumer.

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15
Q

What makes an agent, an agent of the insurer?

A
  • they are the AR of the insurer
  • they collect information from the consumer with express authority from the consumer to do so
  • they have authority to bind the insurer to cover.
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16
Q

According to the FCA the insurers must make it clear that the insured should not…

A

misrepresent

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17
Q

In common law, the duty of disclosure starts when negotiations begin and ends when…

A

the contract is formed (inception)

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18
Q

define inception

A

when the contract is formed.

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19
Q

When is the exception to:
“from the point of inception until the renewal negotiations take place there is no requirement for the insured to declare material information”

A

unless they effect the policy cover (effect the insurable item directly)

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20
Q

What are the points at which material information must be disclosed to the insurer?

A
  1. inception
  2. alteration
  3. renewal
  4. Ongoing is there are continuing requirements
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21
Q

when is the insureds duty of disclosure revived in general insurance policies?

A

at renewal

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22
Q

What is a continuing requirement?

A

Under contract law insurers are ensuring that the insured must update them of any material information that doesn’t directly relate to the risk.

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23
Q

Example of continuing requirement clauses:

A
  • circumstances that increase the risk of damage
  • removal of the insured object to another location
  • extension of activities for liability
24
Q

What happens if the insurer doesn’t ask a certain question

A

they have waived their right to know this information. (insurers can’t use this against you in the event of a claim)

personal insurance only

25
Q

What happens if the consumer only provides a partial answer to a question

A

if the insurer does not seek further details, they have waived their rights to know this information. (insurers can’t use this against you in the event of a claim)

26
Q

examples of material information

A
  • special or unusual information relevant to the risk
  • particular concerns which lead the insured to take out insurance
27
Q

duty of disclosure is required by

A

all parties

28
Q

Example of a physical hazard for material circumstances

A

Motor insurance: age & type of car, age of driver, lisce held, previous accidents, area where vehicle is kept.

29
Q

Example of a moral hazard for material circumstances

A

Insurance history & personal history e.g. refusals to insure, claims history, criminal convictions & excessive carelessness.

30
Q

Information the insured does not have to disclose

A
  1. Information that reduces the risk
  2. Information the insurer is presumed or ought to know (e.g. Law, public knowledge)
  3. Information waived by the insurer (outside the scope of the questions with personal insurance)
  4. information the insured does not know
  5. information covered by policy terms
  6. facts a survey should have revealed (where applicable)
31
Q

Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO)

A

outline rehabilitation periods. once a conviction is spend you don’t have to declare it

32
Q

rehabilitation periods. sentence length 0-6months

A

spent after: sentence length + 2 years

33
Q

rehabilitation periods. sentence length 6-30 months

A

spent after: sentence length + 4 years

34
Q

rehabilitation periods. sentence length 30 months - 4years

A

spent after: 7 years

35
Q

rehabilitation periods. sentence length over 4 years

A

Never spent

36
Q

rehabilitation periods. Fines, community order & youth rehabilitation

A

1 year.

37
Q

2 ways of qualifying misrepresentation

A
  1. careless
  2. deliberate or reckless
38
Q

Define Non disclosure

A
  • within knowledge of 1st party
  • not known to 2nd party
  • used to induce 2nd party to enter a contract
39
Q

Remedy: reasonable mistake

A

insurer may pay claim

40
Q

How you determine what type of misrepresentation occured?

A
  • the type of consumer insurance
  • any relevant explanatory material
  • how clear & specific the questions were
  • How clearly was the importance of the question communicated
  • whether or not an agent was acting for a customer
41
Q

Remedy: Reckless or deliberate

A

insurers may void the contract, refuse to pay claims and can keep any premiums paid

42
Q

Remedy: Careless (if insurer would have entered the contract originally)

A

the contract will be treated as if the correct terms applied unless chosen not to by the insurer.
if a higher premium would have been paid claims are reduced accordingly. They pay x% of what they would’ve paid:
x = premium actually charged / higher premium x100

43
Q

How is reckless and deliberate defined

A
  • consumers knew that it was untrue or misleading
  • knew that or didn’t care that the information was relevant to the insurer
44
Q

Remedy: Careless (if insurer wouldn’t have entered the contract originally)

A

void the contract and refuse all claims but must return the premium.

45
Q

qualifying breach

A

a breach that triggers a remedy

46
Q

If the insured performs part of the contract differently to what the insurer expected then…

A

the same remedies applied as with misrepresentation.

47
Q

what does breach of warranty result in?

A

contract suspension from the time of breach until the breach is fixed. The insured will be liable for any losses during the breach.

47
Q

define warranty

A

condition on the insurance policy which must be exactly followed

48
Q

What is the most common example of compulsory insurance?

A

Third party motor

49
Q

What is a motor insurance is voided due to misrepsentation but there are third part liability claims?

A

The insurer must pay out the liability claims on the grounds of good faith but then has a right of recovery from the insured.

50
Q

When did the duty of disclose apply for private medical insurance?

A

continuously

51
Q

According to ICOBS with joint policies who should information about an insurance policy be sent to?

A

the first named party only

52
Q

How long must firms keep generic files?

A

5 years

53
Q

Which statute allows for a third party, who is a named beneficiary under an insurance policy, to enforce the policy against the insurer?

A

Contracts(Rights of Third Parties) Act 1999

54
Q

Insurers duty of disclosure to the insured

A
  • let them know if discounts available
  • only take risks they’re registered to accept.
  • do not mislead
55
Q

FCA requires firms to make the following clear (in order for customers to know the importance of discolsure)

A
  1. explaining to consumer the responsibility of consumers to take reasonable care when answering questions
  2. explaining to commercial customer the importance of making a fair presentation
  3. ensuring questions asked are clear and specific
56
Q

formula for claim if the insurer would have charged a higher premium due to a misrep or non-disclosure

A

x = premium charged / higher premium x claim

CII (28 decks)

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