Impact of FCA/legislation on utmost good faith Flashcards
Impact of FCA
FCA state insurers/intermediaries must provide sufficent info about a contract to ensure customers can make informed decision about whether to buy or not.
Impact of IA (Insurance Act 2015) - non consumer contracts
Act stated you could no longer avoid a contract on the grounds of breaching utmost good faith.
Act states customers must make a fair presentation of the risk and shifted onus from the insured to the insurer
Impact of CIDRA (Consumer Insurance Disclosure and Representations Act 2012)
Removed common law duty on consumers to disclose all material facts with a duty to take reasonable care not to make a misrepresentation
IA sets out what the insured & insurer should know, the INSURED is meant to know;
What is known to them as an individual or what is known to one or more individuals who are responsible for their insurance (i.e. someone responsible for insured’s insurances)
Measure of insured’s knowledge is defined as “what should have been revealed by a reasonable search of info avaliable to the insured”
IA sets out what the insured & insurer should know, the INSURER is meant to know;
An insurer ought to know something only if;
- An employee/agent of insurer knows and should have reasonably passed on the info
- The info is held by the insurer and readily avaliable to an individual making the decesion on risk
- Things that are common knowledge
Under CIDRA an intermediary is considered to be the insurer’s agent if;
- Is the AR of the insurer
- Collects info from customers with express authority from the insurer
What are warranties?
A gurantee or promise which provides assurance by one party to another
Is contracting out the duty of fair presentation possible?
Yes, but the burden is on the insurer to show that the terms included in the contract were explained to the insured.
Insurers often modify their policy wordings to ensure the duty of disclosure is continuing (even though it revives at renewal automatically) - true or false?
True.
When does the duty of disclosure start and end?
Duty of disclosure starts when negotiations begin and ends when the the contract is formed (at inception). From that point onwards under renewal negotiations there is NO requirement for the customer to declare material facts unless they affect the policy cover.
Insurers are often concerned that their rights under common law are limited because they do not need to be advised of certain changes mid-term. Therefore, different classes of insurance take different approaches to this by altering their policy wording;
Commercial - policy condition requires continuing disclosure if customer changes location or circs change where the risk of damage increases
Motor - policy condition requires continuing disclosure of all material changes throughout the policy
Public liability - insured most notify insurer of any extention of activities in order for cover to apply
If a customer wants to make a change to their general insurance policy the duty of disclosure is revived in relation to that change - true or false?
True
When is an insurer deemed to have waivered their rights to information?
If insurer asks customer a Q but they only give partial information in response, if the insurer does not seek further details it’s deemed the insurer has waivered (given up) it’s right to the information.
Where there has been a breach of utmost good faith by the customer, the insurer will generally have the right to avoid the policy - true or false?
True
Why must insurers be careful when claiming there’s been a breach of utmost good faith?
Insurers must not act in a way that suggests they’ve waivered their right to avoid the contract (i.e. writing to the insured actioning a 7 day cancellation) as the insurer will be ESTOPPED from avoiding the policy on grounds of non-disclosure at a later date.
