material circumtances Flashcards
What is a Material circumstance
Is any which would affect the judgement of a prudent insurer in considering
- whether to accept the risk or not
- if they are willing to accept the risk, then at what rate of premium and on what terms and conditions
What are the duties of the proposer
There duties are
- take reasonable care not to misrepresent if they are consumers
- to make fair presentation of information relating to the risk to be insured if non-consumer
What are other material information need to be disclosed by the insurer
- Details of previous losses(doesn’t matter whether insured or not)
- any special terms/conditions imposed by past insurers or of declination ought to be disclosed
What are the circumstances that don’t need to be disclosed
- circumstances that lessen the risk
- circumstances the insurer ought to know
- Circumstances where insured has waived its rights
- circumstances the insurer knows
- Circumstances the insurer is presumed to know
- circumstances that a survey would have revealed
- spent conviction
Which amendment included spent conviction as a fact that does not need to be disclosed
Rehabilitation of Offenders Act 1974 as amended by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO)
What does the Legal Aid Sentencing and Punishment of Offenders Act 2012 state
It states that after varying period of time depending upon the severity of the original sentence imposed, conviction become spent. Thus treated as never having happened and this no need to disclose them
How are Conviction for those below 18 years old different from the rest
There sentences are halved except for custodial sentences of up to 6 months where the buffer period is 18 months
For Rehabilitation of offenders what is the buffer period
The period that runs beyond the length of the sentence
So according to the Rehabilitation of Offenders, how do we calculate the Rehabilitation period
This is the Length of the sentence plus the buffer period
Which Act deals with disclosure by private individuals/consumers
Consumer Insurance(Disclosure and Representation)Act 2012 (CIDRA), it requires consumers to take reasonable care not to make misrepresentation and emphasis on insurers to ask the right questions in a clear way
What are the different remedies provided by the CIDRA in the case where the insurer has been induced by misrepresentation to enter into an insurance contract
- i f its an honest and reasonable misrepresentation insurer must pay the claim
- if the misrepresentation was careless then insurer should act as it would have done if the question was answered correctly, either by applying exclusion or charging higher premium
- If the misrepresentation was deliberate or reckless- insurer is entitled to treat the policy as void and declaim all claims
What did the CIDRA Act abolish
It abolished the basis of contract clause. This clause enabled insurers to avoid a policy for any breach of warranty by the insured.This abolishment brings the law in line with the industry practice and the approach of the financial ombudsman
What did the Insurance Act 2015 state about non consumer /commercial consumers
They have a duty to make fair presentation ad a risk
What does making a fair presentation of the risk for non consumers involve
It involves disclosing every material circumstance which the insured knows/ought to know/providing sufficient information for a prudent insurer to recognize that it needs to make further enquirers
What is another meaning or way of making fair presentation
This means presenting the information in a way that is clear and accessible to the insurer. And the insurer need to take responsibility for asking questions and probing for information about a risk
What the insured is deemed to know/ought to know is described in the IA 2015 to include
- knowledge held by insured’s senior management and person’s responsible within the organisation for arranging the insurance
- what ought to be known in the ordinary course of the insured’s business
- information there was suspicion about
- information that should reasonably have been revealed by a reasonable search
- information held within the insured’s own organisation and by others
According to the IA 2015 what information ins the insurer required to know /find within its own organisation rather than expecting the insured to disclose
- Information that is held by the insurer and accessible to the underwriter
- Information that is common knowledge
- Information that an insurer writing this type of risk would reasonably be expected to know
According to the IA 2015, when can an insurer issue remedy against an insured for a breach of duty of fair presentation
Insurers can issue remedy against the insured if for the breach it would either
-Not entered the contract at all
-would have entered but on different terms
Such a breach is a qualifying breach
Before the insurer can consider applying any remedy it has to establish whether the breach is
1.deliberate/reckless
2.neither deliberate or reckless
The insurer has to prove if the breach was deliberate or reckless
If the insurer is able to prove that the breach was deliberate, what action can they take
- The insurer can avoid the contract and refuse to pay claims
- The insurer can choose not to return any premium paid
If the insurer prove that the breach was not deliberate or reckless, what remedies can they take
- If the insurer would not have taken the risk, if it had known the information which has come to light, then the insurer can avoid the contract but must return the premium
- If the insurer would have charged a higher premium, then it can reduce any claim payment proportionately
- If the insurer would have taken the risk but on new/different terms like exclusions/extensions/sub- limit, then contract would be treated as if it had entered those terms, but insurer can seek to avoid policy
In material circumstances what is a physical hazard
This is a physical characteristics of the risk that is measurable dimensions
What are the physical hazard of fire insurance
- Nature of construction of the building
- provision of fire fighting equipment
- trade processes
What are the physical hazard of theft insurance
- Nature of construction of the building
- security features
- nature of contents of building
What are the physical hazard of motor insurance
- Age of the driver
- make and model of the vehicles
- place where it is usually kept
- its use
What are the physical hazard of Employers liability insurance
- Industrial processes in a factory
- guarding of machinery
What are the physical hazard of Personal Accident and Sickness insurance
- Proposers’ Occupation
- dangerous pastimes
What is a good physical hazard
These are aspects that are likely to reduce the likelihood of loss or its severity compared to an average risk
What is a poor physical hazard
These aspects that are likely to increase the incidence of loss or potential severity
What are the good physical hazard for fire insurance
- Brick/Concrete
- metal fire doors
- automatic sprinklers
- alarm systems
- goods from the less dangerous area in a factory
What are the poor physical hazard for fire insurance
-Thatched roof
-storage of dangerous chemicals
-oils
combustible packing materials
What are the good physical hazard for theft insurance
- Security Locks
- intruder alarm
- low risk premises
What are the poor physical hazard for theft insurance
- high risk premises
- building of lightweight construction
- flimsy window catches
- easily portable items
What are the poor physical hazard for Motor insurance
- young/inexperienced drivers
- use of vehicles for certain trade( taxis/uber)
- vehicles costly to repair(Porsche)
What are the good physical hazard for Motor insurance
- Vehicle secured in a garage
- use of vehicles in areas of low density traffic
What are the good physical hazard for Employers’ Liability Insurance
- use of extractor fans
- protective clothing, goggles and masks
- well-guarded machinery
What are the poor physical hazard for Employers’ Liability Insurance
- use of chemicals and oils
- creation of dusts and vapors
- excessive noise
What are the poor physical hazard for personal accident and sickness Insurance
- clerical type occupation
- good health record
What are the good physical hazard for personal accident and sickness Insurance
- hazardous occupation
- history of recurring illness
- an excessively overweight person
What is Moral Hazard
This relates to the human aspects that may influence the outcome of the risk
What is Moral Hazard concerned with
It is concerned with the attitudes and conduct of individuals or society rahter than what is being insured
In insurance the prime consideration in relation to moral hazard is
The prime consideration is the insured person not the subject matter of insurance. But the conduct of the insured’s employees and of society in general have an increasing influence on moral hazard
Often a poor physical hazard will exist as a result of
It will exist as a result of a poor moral hazard
What are proposal forms most commonly known for
They are most common mechanism by which the underwriter receives information regarding the risk to be insured
What type of questionnaire is a proposal form
This is a type of questionnaire asking questions about the subject matter of the insurance
The proposal form is filled out by who and delivered to who
It is filled out by the proposer and submitted to the underwriter. The forms may be submitted directly to the underwriter or through an intermediary
When dealing with consumer CIDRA places the onus on insurers, to do what exactly
It places onus on the insurer to ask all the relevant questions
When determining whether the consumer’s subsequent discovered misrepresentation was reasonable what is taken into account
The clarity and scope of the insurer’s questions will be taken into account.
What has led to the increase in the importance of asking the right questions
The growth of peer to peer arrangements, they may influence the underwriter’s opinion of the desirability of the risk
What are the general questions usually on a proposal form
- The proposers’ name
- The proposer’s address
- the proposer’s occupation
- The proposer’s age
- Details of past insurance history
- Details of other insurances
Why do insurers request details of other insurances covering the same risk
For indemnity contract this will alert them to potential contribution rights at the time of a claim. For benefit policies insurer will want to satisfy that weekly benefits will not act as a incentive for the insured to stay off work linger than necessary in the event of a claim
Why will a proposer form as about details of previous claims
This is because some risks are heavily dependent upon pas losses for rating purposes.
If a history of claims shows a higher than expected frequency of losses, what should the insurer do
Insurer should take some actions whether risk may possibly be unacceptable to the insurer or they can only accept at a higher premium than normal or subject to some restrictions in cover
For private motor what determines the policyholder’s entitlement to no-claim discount
The precise number of claim- free years
In the proposal forms, questions on subject matter of insurance will vary according to
They will vary according to policy class. E.G Property insurance is the physical risk insured;liability risk define the scope of the b’ness activities covered;motor risk defines both vehicle covered and liabilities arising from the use of the vehicles
What are some examples of risk specific questions for Motor Insurance
- Age of driver
2. Criminal prosecution pending or conviction
What are some examples of risk specific questions for Liability insurance
- Noise risk
- Pollution hazards
- work away from the premises
- Contracts entered into
What are some examples of risk specific questions for Fire insurance
- Manufacturing processes
- storage arrangement
- building construction
What are some examples of risk specific questions for Theft insurance
- Breakdown of types of stock
2. Security precautions
On the proposal for, what is required of the declaration
The declaration which the proposer signs and which declares that to the best of the proposers’s knowledge and belief the answer given on the proposal; form are true
Apart from proposal forms, what is the most common way for the underwriter to obtain information
- Surveys
- Supplementary questionnaire
- Market reform contract
- Meeting with the client
- Writing to the proposer
Which type of insurance are surveys most useful and commonly used
They are often used in property insurance for larger risks e.g large manufacturing plant
In surveys for property insurance, what do surveyors act as
Risk surveyors act as the eyes and ears if the underwriter providing report with detailed information ad a plan showing the layout of the premises
When are supplementary questionnaires used
They are common with some insurers whilst dealing with particular aspects of risks
In which areas of risks can supplementary questionnaire be used
- Public Liability risks
- Product risks
- Money risks
- Fire Insurance
What does the Market Reform contract include
The MRC carries full details of the risk in a recognized format and is used in London Market placings
Where did the Market Reform Contract originate
Its origins in the slip traditionally used at Lloyd’s, but is now common market in London generally
when is meeting with the client commonly used
It’s often used in the case of commercial insurances
When is writing to the proposer commonly used
It is used in the case of personal insurance using both formal letters on paper and electronic formats
