IF2 - Module 8 Flashcards
What is a material circumstance?
A material circumstance is any information which would affect the judgment of a prudent insurer as to whether to accept the risk and, if so, at what rate of premium and on what terms and conditions.
Under the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA) consumers must..
consumers must take reasonable care not to make a misrepresentation and to answer insurers’ questions fully and accurately.
Insurers must not penalise proposers for personal insurances who have answered questions to the best of their knowledge and belief but are subsequently found to have been responsible for an innocent misrepresentation or non-disclosure.
An insurer can only decline a claim if a consumer’s misrepresentation was deliberate or reckless.
If the misrepresentation was careless, the insurer can act as it would have done if the question had been answered correctly; for example, by applying a policy excess or by charging a higher premium.
Under the Insurance Act 2015, commercial customers have…
commercial customers have a duty to make a fair presentation of the risk to insurers. This includes disclosure of every material circumstance which the insured knows or ought to know (as defined in the legislation) or giving insurers enough information to put them on enquiry that they need to seek further information. It also means presenting the information clearly and accessibly to the insurer.
Contracting out of the duty of fair presentation is possible, in which case the previous law on disclosures applies. However, the insurer must be able to show that the terms included in the contract were fully explained to the insured.
An insurer can only avoid a policy if the insured has made a deliberate or reckless breach.
What are some proportionate remedies an insurer can take in certain circumstances?
- if the insurer would not have entered into the contract at all they can avoid it and refuse all claims after the date of the breach, but they must return the premium;
- if the insurer would have entered into the contract, but on different terms (not related to the premium), then the contract will be treated as if those terms applied;
- or if the insurer would have entered into the contract, but charged a higher premium, then claims after the date of the breach can be reduced proportionately.
What circumstances typically need to be disclosed by a proposer to an insurer?
Circumstances which make the risk of loss or damage more likely than normal need to be disclosed, as does information about previous losses and any refusals of cover, or special terms imposed, by a previous insurer.
What are circumstances that do not need to be disclosed?
These include:
- circumstances that lessen the risk;
- circumstances 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; and
- spent convictions.
What changes did the The Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (Amendment) (England and Wales) Order 2020 bring into law?
- cautions given to under 18s no longer have to be disclosed;
- the multiple conviction rule has been removed, meaning each offence should be considered individually; and
- applicants must be told how to get independent advice about which cautions and convictions must be disclosed.
What changes did the The Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (Amendment) (England and Wales) Order 2020 bring into law?
- cautions given to under 18s no longer have to be disclosed;
- the multiple conviction rule has been removed, meaning each offence should be considered individually; and
- applicants must be told how to get independent advice about which cautions and convictions must be disclosed.
What is physical hazard?
These relate to the physical characteristics of the risk. For example, the more expensive an item is, the more likely it is to be stolen. The more security measures in place, the less likely it is to be stolen
What is moral hazard?
These arise from the attitude and behaviour of people. For example, careless drivers have an increased risk of having an accident, people who have made fraudulent claims in the past represent more of a moral hazard than those who have not.
What are good hazards?
Good hazards are those which are likely to reduce the frequency or severity of loss, such as fire alarms, security locks and protective clothing.
What are poor hazards?
Poor hazards are those which increase the frequency or severity of loss. Examples include buildings of lightweight or wooden construction, young or inexperienced drivers and hazardous occupations.
The most common mechanism by which an underwriter obtains information about the risk to be insured is?
the proposal form
Proposal forms are made up of two types of questions, what are they?
General questions - Those that are not necessarily specific to the actual class of insurance being applied for.
Specific questions - Those that relate to the type of risk for which cover is sought.
What is the purpose of price comparison websites?
Price comparison websites enable a client to gain several quotes via an electronic e-quote form. The comparison website concludes agreements with a number of insurers to provide a comparative quote based on a predetermined list of specified needs, as disclosed by potential clients.
Price comparison sites optimise user experience, customer insight and search engine performance across a variety of mobile platforms. Despite the popularity of these sites, there is still criticism that they focus too much on price.
