IF3.1 Material Information

Question 1

For a contract to be legally binding it must contain

Answer 1

offer
acceptance
consideration

Question 2

Consideration

Answer 2

a benefit received by one party in return for a promise of the performance of an act by another party.

Question 3

Caveat Emptor

Answer 3

Buyer beware

Question 4

Why do insurance contracts not under Buyer beware

Answer 4

They are based on a promise to do something in the even that a certain set of circumstances occurs in exchange for payment of the premium.

I.e. the promise is not tangible until the loss occurs.

Question 5

What legal principle are insurance contracts governed under?

Answer 5

Good faith

Question 6

consumer Insurance (Disclosure and representation) Act 2012 (CIDRA)

Answer 6

Consumers are only obliged to answer questions asked of them by insurers in the proposal form, but they must take care to answer those questions fully and accurately

Question 7

Material Circumstance

Answer 7

it would influence the judgment of the underwriter in determining whether to take the risk and if so on what terms.

Question 8

Facts which do not need to be disclosed (Insurance Act 2015)

Answer 8

• facts of law
  -facts of public knowledge
• spent convictions
• facts that lessen the risk
• facts where the insurer has waived its right to certain information
• facts that a survey should’ve revealed
• facts the insured did not know
• facts covered by the policy terms
• facts the insurer already knows

Question 9

How must insurers assess whether a consumer has taken reasonable care?

Answer 9

• type of insurance
• explanatory material
• clarity of the insurers questions
• how clearly the insurer communicated the importance of the questions
• how clearly the insurer communicated the consequences of failing to answer their questions
• whether an agent was acting for the consumer

Question 10

Vulnerable Customer

Answer 10

Someone who due to their personal circumstances is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.

Question 11

Guidance for firms dealing with vulnerable customers

Answer 11

• understanding the needs of vulnerable customers
• the skills and capabilities of staff
• action they can take to improve service

Question 12

Fair presentation of the risk

Answer 12

1. the proposer must disclose every material circumstance it knows
2. the proposer must ensure its representation is clear and accessible.
3. All material circumstances should be correct and made in good faith.

Question 13

when do duties of fair presentation lie

Answer 13

when negotiations start until the contract is made.

Question 14

When is duty of fair presentation revived

Answer 14

• alteration of the risk
• claims are made
• at renewal.

Question 15

Non-disclosure

Answer 15

The proposer simply fails to tell the insurer something the know, and it is something that would have made the insurer either not enter the contract or do so on different terms.

Question 16

Misrepresentation

Answer 16

This where the statement is substantially false, relates to the subject matter or the proposal and has induced the insurer to enter the contract.

Question 17

Qualifying breach

Answer 17

A breach where the consumer did not take reasonable care and led the insurer to enter the contract when they otherwise wouldn’t

Question 18

Consumer Remedy: breach was honest and reasonable
(Consumer Insurance (Disclosure and representations) Act 2012)

Answer 18

Insurer may have to pay the claim

Question 19

Consumer Remedy: breach was Careless

Answer 19

The insurer will give a proportional payout to the claim depending on the premium if the insured had answered the questions properly

Question 20

Consumer Remedy: breach was Deliberate or reckless

Answer 20

Insurer may treat the policy as if it never existed and decline all claims.

Question 21

Non-consumer remedy: breach was deliberate or reckless

Answer 21

(if the insured knew about the breach and/or they did not care)
The insurer can avoid the policy and keep any premiums that have been paid.

Question 22

Non-consumer remedy: breach was no deliberate or reckless

Answer 22

if the insurer can prove they wouldn’t have written the policy: Insurer can avoid the policy but has to return premiums.
If the insurer would’ve accepted risk on different terms: the contract is treated as it if included those terms.
if the insurer would have entered the contract but charged a higher premium: The insurer may proportionately reduce the amount paid for the claim.

Question 23

If the breach is fraudulent what is the remedy

Answer 23

policy is voidable
the insurer can keep the premiums and sue for damages

Question 24

hazard

Answer 24

that which influences the operation of the peril

Question 25

peril

Answer 25

that which gives rise to a loss

Question 25

Most common way for the underwriter to obtain information regarding the risk

Answer 25

proposal form

Question 26

Methods of the underwriter obtaining material information

Answer 26

• proposal form
• brokers
• risk surveyors
• Supplementary questionnaires
• meeting with clients
• call centres
• internet

Question 27

what do Risk registers store

Answer 27

individual exposures and claims experience, site inspection reports and preparation of health and safety reports.

Question 28

What is a risk register

Answer 28

a fact finding tool that a broker uses when talking to clients

Question 29

When are Risk surveys used

Answer 29

used to obtain information where the risk is large and or complex

Question 30

Where would supplementary questionnaires be used?

Answer 30

when dealing with particular aspects of the risk e.g.
- money risks involving high value transactions
- fire risks in respect for old obsolete buildings
- public liability risks involving hairdressing where use of certain tool/chemicals needs further investigation.

Question 30

What do risk surveys include

Answer 30

• full description of the risk
• an assessment of the level of the risk
• measure of the estimated maximum loss (EML) which is the maximum the surveyor believes will be the subject of a loss.

Question 31

Good faith in consumer contracts

Answer 31

answer questions an underwriter asks fully and accurately (take reasonable care not to misrepresent)

Question 32

Good faith in non consumer contracts

Answer 32

give a fair presentation of risk & a reasonable search has been carried out

Question 33

Examples of material circumstances

Answer 33

• special or unusual facts
• any particular concerns which are leading to the request of insurance
• facts that are specific to the class of business

Question 34

How do insurers assess whether a consumer has taken reasonable care

Answer 34

• the type of insurance and the customer it is aimed at
• explanatory material
• clarity of the insurers questions
• how clearly the insurer communicated the importance & consequences of failing to answer the questions
• whether an agent was acting on behalf of the consumer

Question 35

duty of disclosure through the contract for property

Answer 35

• removal to another location (stock)
• circumstances that increase the risk of damage

Question 36

Exception to duty of disclose for motor and home insurance

Answer 36

• often have an ongoing condition requiring all material information

Question 37

Exception to duty of disclose for public liability insurance

Answer 37

• extension of activities

Question 38

Does a broker have a duty of disclosure?

Answer 38

yes, they need to pass all the information between the underwriter and the consumer.

Question 39

If a proposer is unsure is a fact is material or not

Answer 39

• they should ask the insurer
• enter it anyway

Question 40

Disclosure of an Intermediary

Answer 40

• all the facts communicated by the proposer
• any other information they are aware of