IF3.3 Insurance Policies Flashcards
The Consumer Insurance (disclosure and representations) Act 2012
Insurers duty
requires that all questions are exact and clear enough for consumers to understand
Policy Schedule
Contains all the variable information concerning the insured and the details of the risks insured
Consumer Rights Act 2015
If a term is not transparent or prominent, it can be assessed for unfairness and can not bind the consumer to it.
Insurance Act 2015 (needs for insured and insurer)
Both parties must be clear about the policy terms and requirements including remedies when things go wrong, BEFORE entering the contract
Contra Proferentem
When the insured interprets a contract term in a different way to expected (gives the insurer incentive to be particularly clear)
What will all insurance policies contain (structure)
- heading
- preamble (recital clause)
- signature clause
- operative clause
- exclusions
- conditions
- policy schedule
- information and facilities
What does the preamble/recital clause do?
sets the scene for what follows in the policy - outlines the contract.
How does the policy wording and the schedule interact?
the policy wording is generic and the schedule links the personal features with the policy.
parol evidence rule
neither party can rely on the negotiations leading up the the contract (only the contract itself)
Operative clause
the actual cover is outlined (in a number of clauses), specific exceptions are outlined
What does an operative clause begin with
“The company will…” or something similar
What are the 3 types of exclusions
General, Market & specific
What are General Exclusions
apply to all sections of the policy and allow the insurer to deny cover under the policy
What are Market exclusions
exclusions that apply across the market to all GI insurances
What are specific exclusions
apply to particular sections of the policy
Condition
a contractual term that the insured agrees to comply with during the period of cover
Express conditions
always stated in the policy
Implied conditions
implied by common law and practise (do not need to appear in the policy)
Policy Schedule
Where the policy is made personal and specific including personal info and risk specific info (not pre-printed and applicable to all)
variable parts of a policy
- insureds name
- insured address
- premium
- policy period
- details of the subject matter
- sum insured/liability limit
- policy number
- reference to specific exclusions, conditions or aspects of cover.
- operative sections
What will information and facilities in the policy contain
definitions, customer service standards statement, complaints procedure & claims information
Enterprise Act 2016
duty of insurers to pay claims promptly
Exclusions examples
- war and related perils
- radioactive contamination and explosive nuclear assemblies
- terrorism
- pollution and contamination (excluded unless in the form of an insured peril)
- cyber risks
- marine policies
- contractual liabilities
- sonic bangs
war and related perils is the…
responsibility of the state
radioactive contamination and explosive nuclear assemblies cover is provided by….
market pools where insurers and reinsurers accept a share of the risk according to their underwriting capacity.
Which exclusions can you buy back with Pool Re ?
- terrorism
- cyber risks
How does PoolRe work?
insurers will offer terrorism/cyber cover to customers then immediately reinsure the whole risk with PoolRe who decides the premium rates (not in NI)
Terrorism cover must be purchased for all sections of a single policy and each individual insurers maximum liability is capped for each terrorist event and per year based on an insurers market share.
If Marine cover is bought then what happens if material damage cover for property also covered by a marine policy
Marine cover is the effective policy unless there is a corresponding clause
contractual liabilities exclusion
If there is a liability of of a contract made by the insured then it is excluded.
Why is damage from sonic bangs excluded?
the aviation industry is responsible for damages
What are possible conditions in the policy
- duties of the insured
- Alteration
- Action in the event of a claim
- fraud
- Reasonable precautions
- contribution
-subrogation - average
- arbitration
- cancellation
duties of the insured condition
the insured must observe and fulfil all terms of the policy
Alteration condition
the insured should notify the insurer of any changes that increase the risk.
Example of conditions when claiming
- how soon after an event a claim needs to be notified
- method of notification
Fraud condition
any benefit under the policy is forfeited if:
- the claim is in any way fraudulent (and is being used to obtain benefit)
- any destruction or damage is caused by the wilful act of the insured or anyone acting on the insureds behalf
What does the reasonable precautions condition mean?
The insured should take reasonable care not to cause a loss (they should not treat cover as an excuse for carelessness)
Insurers are rarely able to rely on them in the event of a loss.
Catch All
conditions which allow the insurers to unrightfully deny a claim, broad and unspecific reason to deny claims.
Contribution
the right of an insurer to call upon other insurers similarly, but not necessarily equally, liable to the same insured in order to share the claims cost.
When is contribution not a condition
when there is a non-contribution clause (or no dual insurance)
Subrogation
the right of the insurer to take over the insured’s rights, following payment of a claim, in order to recover the payment (or part of it) from a third part wholly or partly responsible for the loss.
Arbitration condition
Any dispute for the amount (quantum) paid out of claim will be settled by an independent arbitrator.
Warrenty
A promise made by the insured relating to facts or performance concerning the risk. I.e. the insured promising will or will not be done, or promising that something exists or does not exist.
Continuing warranty
the insured promises that a state of affairs will continue to exist or the insured will continue to do something.
Why are warranties used?
control aspects of the risk that the insurer believes to be the most important (or are particularly concerned about).
implied vs express warranties
express are written in the policy, implied are not.
Consumer Insurance (Disclosure and Representation) Act 2012 about warranties
means insurers can’t refuse a claim if the breach of warranty didn’t contribute to the loss.
In consumer and non-consumer contracts a breach of warranty…
suspends the contract (however consumer only suspends the aspect it effects, non-consumer suspends the whole policy)
Conditions precedent to the contract
must be fulfilled prior to the formation of the contract itself
Examples of conditions precedent to the contract
implied conditions e.g. good faith, insurable interest
Conditions subsequent to the contract
must be complied with once the contract is in force
Examples of conditions subsequent to the contract
notification of alteration of the risk
Conditions precedent to liability
Must be complied with for there to be a valid claim.
If not complied with, insurers may avoid liability for particular loss, but need to not repudiate the contract as a whole.
Representations
Written or oral statements made during the negotiations for a contract which are not written in the policy.
Compulsory vs Voluntary excess
Compulsory is imposed by the insurer, voluntary is done by the insured in return for a premium discount.
Example of Conditions precedent to liability
conditions saying a claim should be made within a certain time.
Excess
the first amount of each and every claim for which the insured is responsible
Deductible
A very large excess (in commercial insurances)
Franchise
A fixed amount or period that acts as a threshold to determine whether claims are payable. Once the amount or period is exceeded, the claim is payable in full and nothing is deducted.
when are time franchises common?
sickness & personal accident policies
