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10 Cards in this Set
- Front
- Back
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What is a material circumstance? |
A material circumstance is any which would affect the judgement of a prudent (or reasonable) insurer in considering: - whether or not to accept the risk, and - if willing to accept the risk, at what rate of premium and on what terms and conditions. |
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Which circumstances, although relevant, do not need to be disclosed? |
- Circumstances that lessen the risk - Circumstances the insurer knows - Circumstances the insurer ought to know - Circumstances the insurer is presumed to know - Circumstances where the insurer has waived its rights - Circumstances that a survey would have revealed |
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What are the rules of disclosure regarding spent convictions? |
-Spent convictions under the Rehabilitation of Offenders Act 1974 as amended (for England and Wales) by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) do not need to be disclosed. - These Acts state that after varying periods of time, depending upon the severity of the original sentence imposed, convictions become spent. They are treated as never having happened and therefore do not need to be disclosed to insurers as material circumstances. |
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What is included in the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA)? |
-Under this Act, consumers are required to take reasonable care not to make a misrepresentation and the emphasis is on insurers to ask the right questions in a clear way. - The Act provides different remedies for the insurer in cases where it has been induced by misrepresentation to enter into an insurance contract. See pic. - The Act also abolishes 'basis of contract' clauses, which enabled insurers to avoid a policy for any breach of the insured's warranting the truth of information. |
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What is included in the Insurance Act 2015? |
- It applies to all consumer or non consumer insurance contract placed or varied since 12 August 2016. - Certain provisions only apply non-consumer, i.e. commercial insurances, including the duty to make a fair presentation of the risk. - Making a fair presentation of the risk involves disclosing every material circumstance which the insured knows or ought to know or providing sufficient information for a prudent insurer to recognise that it needs to make further enquiries. Making a fair presentation also means presenting the information in a way that is clear and accessible to the insurer. - This means insurers need to take responsibility for asking questions and probing for information about a risk. - IA 15 also details what information the insurer should be able to find within its own organisation breather than expecting the insured to disclose it. This is information: * Held by the insurer and accessible to the underwriter relevant to the risk * That an insurer writing this type of risk would reasonably be expected to know * That is common knowledge |
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What can an insurer do against an insured for a breach of the duty of fair presentation under IA15? |
-IA15 follows a similar approach to cases of material non-disclosure or misrepresentation provided for by CIDRA. - An insurer only has a remedy against an insured for a breach of the duty of fair presentation where it can show that but for the breach it would either not have entered into the contract at all, or would have done so on different terms. - However, before an insurer can consider applying any remedy it has to establish whether the breach was: deliberate or reckless, or not deliberate or reckless. It is for the insurer to prove this. - If the insurer can prove that the breach was deliberate or reckless it can: * Avoid the contract and refuse to pay claims, and * Need not return any of the premiums paid - If the breach was not deliberate or reckless then the new proportionate remedies can be applied: see pic |
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What are basis of contract clauses? |
- In the past some insurance proposal forms contained clauses that included a statement effectively turning everything on that form into a warranty, allowing the insurer to avoid a claim if any information on the form, however immaterial, was inaccurate - IA15 abolished such clauses from business insurance contracts, reflecting the approach already taken in CIDRA. |
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What are physical and moral hazards? |
A physical hazard related to the physical characteristics of the risk, in other words the measurable dimensions. A moral hazard relates to the human aspects that may influence the outcome of the risk. It is concerned with the attitudes and conduct of individuals or society, rather than what is being insured. It is sometimes difficult to distinguish between physical and moral hazard. Very often, when a poor physical hazard exists, it is only the result of a poor moral hazard at an earlier stage. |
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What are good and poor physical hazards? |
Aspects that are likely to reduce the likelihood of loss or its severity compared to an 'average risk' are termed good physical hazards. Similarly, aspects that are likely to increase the incidence of loss or the potential severity may be regarded as bad or poor physical hazards. |
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What is a market reform contract? |
The MRC carries full details of the risk in a recognised format and is often used in London Market placings. The method had its origins in the 'slip' traditionally used at Lloyd's but it is common market practice in London generally. There is an agreed format for Market Reform Contracts and a procedure agreed in the market to support contract certainty. |
