Material Circumstances Flashcards
Proposal forms are used by underwriters as a means of obtaining material facts because…
Is convenient and cost effective.
The purpose Of a proposal form is to gather together all material facts for deciding on acceptance and terms of the risk.
What is The definition of a material circumstance
A material circumstance is any which would affect the judgement of a prudent underwriter in considering whether or not to accept the risk and if willing to accept the risk at what rate of premium and what terms and conditions
What is a hazard
A hazard is the factor which might affect the frequency and severity of the peril
What does physical hazard mean
They are the measurable dimensions of the risk
Type of stock
Age and condition of a motorcycle
What is a moral hazard?
Relates to the human aspects that might influence the outcome of the risk.
An exaggerated claim is Poor moral hazard.
Good housekeeping in an industrial process good moral hazard.
What is meant by a good physical hazard?
It is an aspect of the risk which is likely to reduce the likelihood of loss or its severity compare to an average brisk
What questions are common on all proposal forms?
Name, address, occupation, age, subject matter to be insured, past insurance history past lost history, some insured or limit of liability, period of insurance and details of other insurances
What are the risks specific questions on a proposal form?
They relate to the class of insurance for which cover is being sought.
What circumstances do not need to be disclosed?
Circumstances that lessen the risk, insurer ought to know, insurer has waived its rights, insurer knows, the insurer is presumed to know, circumstances that a survey would have revealed.
The consumer insurance disclosure and representations act 2012 means that an insurer…
Can only decline a claim for consumers mispresentation was deliberate or reckless
The insurance act 2015 requires business insurance…
To make a fair presentation of the risk to the insurer
If a non-consumer rights is the duty of a presentation and it was deliberate or reckless what can the insurer do?
Avoid the contract, refuse to pay claims I need not return premium. If it was never delivered or reckless dinner number of proportional remedies available to the insurer depending on what it would have done at the fair presentation been made. Like will it have been written into the contract or written into the contracts but charged a different premium or if they would’ve not entered into the contract at all
What is the difference between a peril and a hazard
Peril is the event giving rise to the loss and hazard is the factor that influences the severity and the frequency of a peril occurring
What is the difference between a physical hazard and a moral hazard?
A physical hazard relates to the physical characteristics of the risk. Moral hazard relates to the human aspects that might influence the outcome of the risk
What is a proposal form
It is a common method by which the underwriter receives information on the risk to be insured they are completed by the proposal. Both the consumer insurance act 2012 and the insurance act 2015 mean that insurers must be sure to ask sufficient questions and probe the information provided
What other methods would provide a way of obtaining material information
Other methods beside proposal forms are used depending on the type of insurance and complexity of the risk. Methods include the use of surveys, supplementary questionnaires, Internet searches and meetings with the proposal. The London market uses the market reform contract slip
When proposing for personal accident insurance why is it necessary for the proposer to provide details of any insurance cover they may have of a similar nature?
In personal accident insurance is necessary to know of other insurances quoting weekly benefits in order to avoid the possibility of the proposal obtaining cover for an excess of their weekly earnings, as this could be a disincentive to an early return to work.
What is included in a proposal form?
Details of previous claims. Period of insurance. Subject matter of the insurance. Some insured or limit of liability. Specific questions. And declaration.
What is the purpose of specific questions in a proposal form?
Some questions are risk specific and that they relate to a particular class of business every class of insurance has its own specific questions.
What are the specific questions in motor insurance
Age of drivers and criminal prosecutions pending or convictions
What are the specific questions in liability insurance
Noise risks, place and hazards, work away from the premises, contracts entered into.
In fire insurance what are the specific questions
Manufacturing processes, storage arrangements, building construction.
In theft insurance what could be the specific questions
Breakdown of types of stock, security precautions
In cyber insurance what is most likely to be the specific questions
Are you serious aren’t thousand and 15 also requires brokers to be more aware of their responsibilities and assure that day to rest are discussed with the clients, dust increasing the need for specialist knowledge to be able to address these risks effectively
For which class of insurance will an insurer normally request a supplementary questionnaire if they require further information than that provided in a proposal form, rather than arranging a survey?
Money
Why does an underwriter need to be aware of material circumstances when processing an application for insurance?
They can affect they terms on which the risk is accepted.
An underwriter has identified a good physical hazard in relation to an insurance application. What impact will this tend to have on the likelihood and severity of loss?
A decrease in both the likelihood and severity.
The proposal form being completed by an applicant specifically asks for the details of anyone under the age of 25 who is to be covered by the insurance policy. What type of policy is this most likely to be?
Motor
What is always the consequence of a proposer failing to inform an underwriter of all material circumstances relating to a proposed industrial risk?
The risk is not accuratly assessed
How is the likelihood of a loss occurring usually affected by the existence of a poor physical hazard?
It will remain constant or increase
What type of fact, if fraudulently omitted by the proposer when completing a public liability form, might allow the insurer to avoid the insurance policy?
Material circumstance
- A public liability insurance policy contains a condition precedent to liability concerning the precautions to be taken when using cutting torches. In the event of a claim for damage arising from the use of cutting torches and the insured has specifically failed to comply with this condition, the insurer will normally
Refuse to settle the claim
To which countries do rehabilitation periods under the Rehabilitation of Offenders Act 1974 apply?
England and wales only
Which convictions, if any, are never ‘spent’ under the Rehabilitation of Offenders Act 1974?
A custodial sentence over 4 years
Vanessa insures the contents of her house under a typical household contents insurance policy with a £250 excess, but fails to advise her insurer that she takes in lodgers. She discovers that some jewellery valued at £1,000 is missing and there is no evidence of a forced entry. What maximum payment, if any, is her insurer obliged to make?
None
