Material facts in the undewriting process Flashcards
What does “caveat emptor” mean?
Latin for - let the buyer beware.
NOT APPLICABLE TO INSURANCE CONTRACTS. The insurance company must trust the customer to disclose anything which might affect the risk they are insuring.
Define utmost good faith.
A positive duty voluntarily to disclose, accurately and fully, all facts material to the risk being proposed, whether requested or not.
With the duty to disclose material facts, which material facts need not be disclosed by the insured?
- Facts of law
- Facts of public knowledge
- Facts where the insurer has waived its right to the information
- Facts that any survey undertaken by the insurer should have revealed
- Facts that the insured does not know
- Facts covered by the policy terms
- Spent convictions.
Define a hazard.
A hazard is defined in the insurance world as that which influences the operation of a peril.
It is a feature of a risk which makes a loss more or less likely to happen or would cause a loss to be potentially larger or smaller in size.
Define a peril.
A peril is defined in the insurance world as that which gives rise to a loss.
Examples include fire, storm, flood and accidental damage.
To avoid breaching the duty of disclosure, at what points must be material facts be disclosed?
- Leading up to inception
- At alteration
- Leading up to renewal
- Continually
In what 2 ways can the duty of disclosure be breached?
- Misrepresentation (where a statement is substantially false).
- Non-disclosure (where one party fails to tell the other something they know).
Who does the principle of utmost good faith apply to in contracts of insurance?
- The insured
- The Intermediary
- The Insurer
Other than proposal forms and a statement of fact, what alternative methods are there to obtaining material facts?
- Brokers
- Risk surveys
- Supplementary questionnaires
- Meeting with clients
- Call centres
- Internet
