material circumtances

Question 1

What is a Material circumstance

Answer 1

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

Question 2

What are the duties of the proposer

Answer 2

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

Question 3

What are other material information need to be disclosed by the insurer

Answer 3

• 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

Question 4

What are the circumstances that don’t need to be disclosed

Answer 4

1. circumstances that lessen the risk
2. circumstances the insurer ought to know
3. Circumstances where insured has waived its rights
4. circumstances the insurer knows
5. Circumstances the insurer is presumed to know
6. circumstances that a survey would have revealed
7. spent conviction

Question 5

Which amendment included spent conviction as a fact that does not need to be disclosed

Answer 5

Rehabilitation of Offenders Act 1974 as amended by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO)

Question 6

What does the Legal Aid Sentencing and Punishment of Offenders Act 2012 state

Answer 6

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

Question 7

How are Conviction for those below 18 years old different from the rest

Answer 7

There sentences are halved except for custodial sentences of up to 6 months where the buffer period is 18 months

Question 8

For Rehabilitation of offenders what is the buffer period

Answer 8

The period that runs beyond the length of the sentence

Question 9

So according to the Rehabilitation of Offenders, how do we calculate the Rehabilitation period

Answer 9

This is the Length of the sentence plus the buffer period

Question 10

Which Act deals with disclosure by private individuals/consumers

Answer 10

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

Question 11

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

Answer 11

1. i f its an honest and reasonable misrepresentation insurer must pay the claim
2. 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
3. If the misrepresentation was deliberate or reckless- insurer is entitled to treat the policy as void and declaim all claims

Question 12

What did the CIDRA Act abolish

Answer 12

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

Question 13

What did the Insurance Act 2015 state about non consumer /commercial consumers

Answer 13

They have a duty to make fair presentation ad a risk

Question 14

What does making a fair presentation of the risk for non consumers involve

Answer 14

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

Question 15

What is another meaning or way of making fair presentation

Answer 15

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

Question 16

What the insured is deemed to know/ought to know is described in the IA 2015 to include

Answer 16

1. knowledge held by insured’s senior management and person’s responsible within the organisation for arranging the insurance
2. what ought to be known in the ordinary course of the insured’s business
3. information there was suspicion about
4. information that should reasonably have been revealed by a reasonable search
5. information held within the insured’s own organisation and by others

Question 17

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

Answer 17

1. Information that is held by the insurer and accessible to the underwriter
2. Information that is common knowledge
3. Information that an insurer writing this type of risk would reasonably be expected to know

Question 18

According to the IA 2015, when can an insurer issue remedy against an insured for a breach of duty of fair presentation

Answer 18

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

Question 19

Before the insurer can consider applying any remedy it has to establish whether the breach is

Answer 19

1.deliberate/reckless
2.neither deliberate or reckless
The insurer has to prove if the breach was deliberate or reckless

Question 20

If the insurer is able to prove that the breach was deliberate, what action can they take

Answer 20

• The insurer can avoid the contract and refuse to pay claims
• The insurer can choose not to return any premium paid

Question 21

If the insurer prove that the breach was not deliberate or reckless, what remedies can they take

Answer 21

1. 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
2. If the insurer would have charged a higher premium, then it can reduce any claim payment proportionately
3. 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

Question 22

In material circumstances what is a physical hazard

Answer 22

This is a physical characteristics of the risk that is measurable dimensions

Question 23

What are the physical hazard of fire insurance

Answer 23

• Nature of construction of the building
• provision of fire fighting equipment
• trade processes

Question 24

What are the physical hazard of theft insurance

Answer 24

• Nature of construction of the building
• security features
• nature of contents of building

Question 25

What are the physical hazard of motor insurance

Answer 25

- Age of the driver - make and model of the vehicles - place where it is usually kept - its use

Question 26

What are the physical hazard of Employers liability insurance

Answer 26

- Industrial processes in a factory | - guarding of machinery

Question 27

What are the physical hazard of Personal Accident and Sickness insurance

Answer 27

- Proposers' Occupation | - dangerous pastimes

Question 28

What is a good physical hazard

Answer 28

These are aspects that are likely to reduce the likelihood of loss or its severity compared to an average risk

Question 29

What is a poor physical hazard

Answer 29

These aspects that are likely to increase the incidence of loss or potential severity

Question 30

What are the good physical hazard for fire insurance

Answer 30

- Brick/Concrete - metal fire doors - automatic sprinklers - alarm systems - goods from the less dangerous area in a factory

Question 31

What are the poor physical hazard for fire insurance

Answer 31

-Thatched roof -storage of dangerous chemicals -oils combustible packing materials

Question 32

What are the good physical hazard for theft insurance

Answer 32

- Security Locks - intruder alarm - low risk premises

Question 33

What are the poor physical hazard for theft insurance

Answer 33

- high risk premises - building of lightweight construction - flimsy window catches - easily portable items

Question 34

What are the poor physical hazard for Motor insurance

Answer 34

- young/inexperienced drivers - use of vehicles for certain trade( taxis/uber) - vehicles costly to repair(Porsche)

Question 35

What are the good physical hazard for Motor insurance

Answer 35

- Vehicle secured in a garage | - use of vehicles in areas of low density traffic

Question 36

What are the good physical hazard for Employers' Liability Insurance

Answer 36

- use of extractor fans - protective clothing, goggles and masks - well-guarded machinery

Question 37

What are the poor physical hazard for Employers' Liability Insurance

Answer 37

- use of chemicals and oils - creation of dusts and vapors - excessive noise

Question 38

What are the poor physical hazard for personal accident and sickness Insurance

Answer 38

- clerical type occupation | - good health record

Question 39

What are the good physical hazard for personal accident and sickness Insurance

Answer 39

- hazardous occupation - history of recurring illness - an excessively overweight person

Question 40

What is Moral Hazard

Answer 40

This relates to the human aspects that may influence the outcome of the risk

Question 41

What is Moral Hazard concerned with

Answer 41

It is concerned with the attitudes and conduct of individuals or society rahter than what is being insured

Question 42

In insurance the prime consideration in relation to moral hazard is

Answer 42

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

Question 43

Often a poor physical hazard will exist as a result of

Answer 43

It will exist as a result of a poor moral hazard

Question 44

What are proposal forms most commonly known for

Answer 44

They are most common mechanism by which the underwriter receives information regarding the risk to be insured

Question 45

What type of questionnaire is a proposal form

Answer 45

This is a type of questionnaire asking questions about the subject matter of the insurance

Question 46

The proposal form is filled out by who and delivered to who

Answer 46

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

Question 47

When dealing with consumer CIDRA places the onus on insurers, to do what exactly

Answer 47

It places onus on the insurer to ask all the relevant questions

Question 48

When determining whether the consumer's subsequent discovered misrepresentation was reasonable what is taken into account

Answer 48

The clarity and scope of the insurer's questions will be taken into account.

Question 49

What has led to the increase in the importance of asking the right questions

Answer 49

The growth of peer to peer arrangements, they may influence the underwriter's opinion of the desirability of the risk

Question 50

What are the general questions usually on a proposal form

Answer 50

1. The proposers' name 2. The proposer's address 3. the proposer's occupation 4. The proposer's age 5. Details of past insurance history 6. Details of other insurances

Question 51

Why do insurers request details of other insurances covering the same risk

Answer 51

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

Question 52

Why will a proposer form as about details of previous claims

Answer 52

This is because some risks are heavily dependent upon pas losses for rating purposes.

Question 53

If a history of claims shows a higher than expected frequency of losses, what should the insurer do

Answer 53

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

Question 54

For private motor what determines the policyholder's entitlement to no-claim discount

Answer 54

The precise number of claim- free years

Question 55

In the proposal forms, questions on subject matter of insurance will vary according to

Answer 55

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

Question 56

What are some examples of risk specific questions for Motor Insurance

Answer 56

1. Age of driver | 2. Criminal prosecution pending or conviction

Question 57

What are some examples of risk specific questions for Liability insurance

Answer 57

1. Noise risk 2. Pollution hazards 3. work away from the premises 4. Contracts entered into

Question 58

What are some examples of risk specific questions for Fire insurance

Answer 58

1. Manufacturing processes 2. storage arrangement 3. building construction

Question 59

What are some examples of risk specific questions for Theft insurance

Answer 59

1. Breakdown of types of stock | 2. Security precautions

Question 60

On the proposal for, what is required of the declaration

Answer 60

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

Question 61

Apart from proposal forms, what is the most common way for the underwriter to obtain information

Answer 61

1. Surveys 2. Supplementary questionnaire 3. Market reform contract 4. Meeting with the client 5. Writing to the proposer

Question 62

Which type of insurance are surveys most useful and commonly used

Answer 62

They are often used in property insurance for larger risks e.g large manufacturing plant

Question 63

In surveys for property insurance, what do surveyors act as

Answer 63

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

Question 64

When are supplementary questionnaires used

Answer 64

They are common with some insurers whilst dealing with particular aspects of risks

Question 65

In which areas of risks can supplementary questionnaire be used

Answer 65

1. Public Liability risks 2. Product risks 3. Money risks 4. Fire Insurance

Question 66

What does the Market Reform contract include

Answer 66

The MRC carries full details of the risk in a recognized format and is used in London Market placings

Question 67

Where did the Market Reform Contract originate

Answer 67

Its origins in the slip traditionally used at Lloyd's, but is now common market in London generally

Question 68

when is meeting with the client commonly used

Answer 68

It's often used in the case of commercial insurances

Question 69

When is writing to the proposer commonly used

Answer 69

It is used in the case of personal insurance using both formal letters on paper and electronic formats