Insurance Policies Flashcards
How has policy wording evolved?
Insurers must develop clear, understandable documents. The Consumer Insurance (Disclosure and Representations) Act 2012 requires clear, exact questions. The Insurance Act 2015 ensures clarity on terms, obligations, and remedies. The Consumer Rights Act 2015 reinforces transparency, preventing unfair terms.
What is contra proferentem?
An ambiguous contract term is interpreted against the party that drafted it. Insurers must draft clear, precise policy terms.
What are the main components of an insurance policy?
Heading, Preamble, Signature, Operative Clause, Exclusions/Exceptions, Conditions, Policy Schedule.
What are common exclusions in insurance policies?
General exclusions apply to the entire policy, specific exclusions apply to certain sections, and market exclusions are common across all policies (e.g., war risks).
Why is war usually excluded from insurance policies?
War is a fundamental risk, typically covered by the government rather than insurers.
What are the categories of radioactive contamination & explosive nuclear assemblies exclusions?
Contamination from a nuclear accident and liability for nuclear installations.
Why is terrorism excluded from standard policies?
Terrorism risk led insurers to exclude it. Pool Re was created as a reinsurance arrangement for UK commercial property.
What are the key changes to terrorism insurance post-9/11?
Insurers exclude terrorism unless cover is purchased, and cover must apply to all policy sections and locations. Premium rates are set by insurers. Terrorism cover now includes biological and nuclear contamination. Liability is capped per event and year.
What happens with terrorism cover in Northern Ireland?
The government compensates for terrorism and civil commotion. Private policyholders are not covered by Pool Re.
What are the recent Pool Re developments?
Limited cyber coverage introduced. Counter-Terrorism and Border Security Act 2019 allows Pool Re to cover business interruption losses not tied to property damage. SME definition expanded, and business interruption reinsurance costs are lower.
What is the standard exclusion for pollution and contamination?
Standard exclusion in property policies. Pollution covered only if caused by an insured peril or results in an insured peril. Gradual pollution can be insured via environmental impairment policies.
What does public liability insurance cover in terms of pollution?
It covers sudden, identifiable pollution events—not gradual pollution.
What is the role of ESG risks in insurance?
Growing expectations for businesses to manage ESG risks. Insurers must consider both their own environmental impact and that of insured businesses.
What are the challenges of cyber insurance?
Cyber risks are constantly evolving, with limited buy-back cover available for an additional charge. Some insurers offer bespoke cyber policies with no limits, but at high premiums.
What is the standard marine insurance exclusion?
Material damage covered by marine policies is excluded from property insurance. If marine cover is insufficient, property insurance may cover the excess amount.
What is excluded under contractual liability in insurance policies?
Claims arising from an agreement by the insured to go beyond common law agreements.
What is excluded in property insurance under sonic bangs?
Damage caused by pressure waves from supersonic aircraft is not covered.
What goes in the preamble (recital clause) of an insurance contract?
Preamble = recital clause.
Sets the scene with reference to both parties forming a contract in terms of mutual consideration
What goes in the operative clause of an insurance contract?
Actual cover is outlined
What are implied conditions?
Implied by common law and do not need to appear in the policy (acting as though uninsured etc)
What are express conditions?
Always stated in the policy
What is included in the policy schedule?
Policy is made specific to the insured (name, sum insured, period, premium, risk details etc)
Contribution
Right of an insurer to call upon other insurers to share the claims cost
Subrogation
Right of the insurer to take over the insured’s rights following payment of a claim to recover the payment from a responsible 3rd party
Average
Reducing claims in proportion to underinsurance
Arbitration
Intended to deal with quantum (amounts) disputes in claims settlements
Conditions precedent to contract
Must be fulfilled prior to the formation of the contract. Non-compliance raises doubts as to the entire contracts validity.
Conditions subsequent to contract
Must be complied once the contract is in place.
Conditions precedent to liability
Complied with to have a valid claim. Non-compliance can invalidate liability but not the contract
What is a warranty?
Promises made by the insured relating to facts or performance
How does a warranty apply to consumer / non consumer contracts?
Consumer - insurers still need to consider materiality of breach
Non-consumer - discharges insurer from any liability during the breach (suspensive)
Representation
Representations are written or oral statements made during the negotiations for a contract. Some may contain material information and others may not.
These cannot be ‘converted’ into warranties
Excess
First amount of each and every claim paid by the insured. Can be
Compulsory - imposed by insurer
Voluntary - accepted for premium discount
Deductible
Very large excess
Franchise
A franchise is a fixed amount or period that acts as a threshold to determine whether claims are payable. Once the amount or period is exceeded, the clam is payable in full, nothing is deducted
What is a Condition?
An contractual term that the insured agrees to comply with
Alteration
Requires insured to notify insurer of any ongoing changes to risk during policy period
