insurance Underwriting Process Flashcards
Good faith - Marine Insurance Act 1906
A duty which means that any party
wanting to take out insurance (i.e. a proposer) must provide all information asked for by the insurer
Elements of an insurance contract
Offer, acceptance, consideration
Good faith - consumer contracts
All information provided by the proposer is fair and accurate
Good faith - non-consumer contracts
Fair presentation to the insurer including a ‘reasonable search’
Material information
Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium or determining whether to take the risk.
Examples of non-consumer material information
- special or unusual facts relating to the risk;
- any particular concerns which are leading to the request
for insurance; and - any facts that are specific to the class of business in
question.
Consumer insurance Act 2012 - material facts
Removes the onus from the consumer to decide what is material. They must be fair and accurate in response to any question asked of them
Vulnerable customers
FCA guidance which focuses on
* understanding the needs of vulnerable customers;
* the skills and capabilities of staff; and
* how firms can take practical action.
How was the Marine Insurance Act updated?
Consumer Insurance Act 2012 clarified responsibilities for consumer insurance
Insurance Act 2015 clarified responsibilities for non-consumers
Insurance Act 2015 - fair presentation of risk
Disclosure – Proposers must disclose all material circumstances they know or ought to know. If uncertain, they must prompt the insurer to investigate further.
Clarity & Accessibility – Risk information must be clearly presented, with adequate signposting and full detail. Vague or incomplete information is insufficient.
Accuracy & Good Faith – All disclosed material circumstances must be substantially correct and made in good faith, especially for future event representations.
Difference between Consumer Insurance Act 2012 and Insurance Act 2015
Non-consumers have to disclose material information even if they are not asked for it
How long does duty of fair presentation last?
From negotiation to end of policy
What happens if a policy is changed mid-term?
The duty of fair presentation is revived as if forming a new contract.
How can insurers modify the duty of fair presentation?
Policy wording may include continuing disclosure requirements.
Modifications depend on the type of insurance.
Two breaches of the duty of FR
Non-disclosure
Misrepresentation
Breach of FR when the proposer was Honest and Reasonable
insurer may have to pay claim
Breach of FR when the proposer was Careless
The insurer will have a compensatory remedy based upon what the insurer would have done had the proposer taken care to answer the questions accurately
Breach of FR when the proposer was Deliberate or Reckless
Insurer may treat the policy as if it never existed and decline all claims
What two conditions must be met for insurers to have a remedy to breach of FR?
Insured has breached FR
Insurer can show that the breach meant they entered the contract (or entered on different terms)
What is fraudulent non-disclosure or misrepresentation called?
Concealment
What happens if breach of FR is concealment?
Policy is voidable
Insurer can keep the premium and sue
Insure can ignore the breach of good faith
Peril
That which gives rise to a loss
Hazard
That which influences the operation of the peril
