10 - Policy Wording

Question 1

What does a policy schedule contain

Answer 1

1. Insured’s name
2. Insured’s address
3. Policy period
4. Premium
5. Details of the subject matter
6. Sum insured or limit of liability
7. Territorial limits
8. Policy number
9. Any special exclusions conditions etc
10. Operative sections of the policy

Question 2

As a general rule what are the 7 basic structure for all general policies incorporate

Answer 2

1. Heading
2. Recital clause
3. Signature
4. Operative clauses
5. Exclusions
6. Conditions
7. Policy schedule

Question 3

What is the recital clause

Answer 3

Sets the scene for what follows in the policy by referring to the two parties, insured and insurer (but not by name) coming together to form the contract.

This clause also refers to the premium as having been paid or agreed to be paid by the insured as consideration.

Question 4

What 3 things will the recital clause contain

Answer 4

1. Policy conditions
2. Schedule applicable to the insured
3. Proposal confirmation

Question 5

Why must the insured check the proposal confirmation

Answer 5

Failure to provide correct info can result in:

1. Policy being invalidated
2. Claim being rejected
3. Claim not being paid in full

Question 6

What are the operative clauses in regards to policy documents

Answer 6

They describe the scope of the cover in detail. The are the heart of the policy, specifying what is covered by the policy.

Question 7

How are conditions stated in policies

Answer 7

Implied (exist whether or not they appear in the policy)
or
Express ( are stated in the policy wording)

Question 8

What 4 things does it mean by implied conditions under policy documents

Answer 8

The insured must:

1. Act as if uninsured
2. May be required to advise the appropriate authorities
3. Must take reasonable action ( e.g. attempt to extinguish a fire)
4. Must not hinder (utrudniac) insurers in their investigation of a claim

Question 9

What is meant by the term market exclusions

Answer 9

These are general exclusions common to all insurance policies

Question 10

Why are war and related perils excluded

Answer 10

They are considered to be a fundamental risk applying to the community at large and therefore uninsurable

Question 11

What is Pool Re

Answer 11

A mutual reinsurance company that offer ‘all risks’ perils linked to terrorism

Question 12

What is the only way pollution can be covered under PL policies

Answer 12

Must not be a gradual operating cause and has to be a sudden identifiable event

Question 13

What is a marine policy exclusion

Answer 13

Exclusion is standard in all property insurance policies for material damage to the property

Question 14

What is contractual liability an exclusion of

Answer 14

All motor and liability policies

Question 15

What is the alteration policy common condition

Answer 15

Found in most property insurance policies - duty of fair presentation to notify of any changes that increase the risk

Question 16

What is the action by the insured in the event of a claim common condition

Answer 16

Sets out the procedures to be followed in the event of a claim

Question 17

What is the fraud policy Common condition

Answer 17

In the event of any fraudulent, false or exaggerated claims being made:

1. The policy may be cancelled
2. Claim may be rejected
3. Insured may retain any premiums paid

Question 18

What is the reasonable precautions common condition?

Answer 18

The insured must take all the precautions to minimise the risk of loss or damage

Question 19

What is meant by the average condition

Answer 19

For property insurance, indemnity requires the insurer to pay the full value of the loss, but only if the insured has declared the full value of the insured risk.

The average condition reduces claims payments under property insurance policies in proportion to the amount of under insurance

Question 20

What is the subrogation common condition clause?

Answer 20

It’s the right of the insurer to take over the insured’s rights, following payment of a claim

Question 21

What is the arbitration common condition?

Answer 21

It’s intended to deal with any disputes that arise as to the amount to be paid in settlement of a claim under a policy

Question 22

The insured may be able to receive a refund under the cancellation condition if the insurer exercises its right to cancel by which way

Answer 22

A pro rata refund

Question 23

What happens if the insured cancels the policy under the cancellation condition

Answer 23

If the policy hasn’t stated the insurer will return any premium paid in full

Within 14 day so the insured receiving the policy docs the insurer will return any premium paid less an admin fee

After 14 days the insurer will return any premium paid less an admin fee and the amount for the period the policy has been in force

Question 24

What did the deregulation act 2015 do in respect of motor insurance

Answer 24

Don’t have to return motor cert

Question 25

What are the 5 things insurance do for info and facilities

Answer 25

1. Definitions. Insurers will define a single word
2. Customer service standards statement
3. Complaints procedures
4. Claims info
5. Privacy notice

Question 26

What is an excess

Answer 26

The first amount for each and every claim for which the insured is responsible

Question 27

What is the name for a large excess

Answer 27

A deductible

Question 28

What is a franchise in respect to excess

Answer 28

It’s a fixed amount or period that acts as a threshold to determine whether claims are payable

Question 29

What are time franchises sometimes found in

Answer 29

Engineering BI cover and sickness cover

Question 30

What is meant by a warranty

Answer 30

A promise made by the insured relating to facts or performance concerning the risk

Question 31

What is a continuing warranty

Answer 31

Where the insured promises that they will do something or things will continue

MSZ note - A warranty whereby the Insured promises that a state of affairs will exist for the duration of the policy

Question 32

What happens under the Insurance Act 2015 is there is a breach of warranty

Answer 32

An insurer will not repudiate liability for a loss under a consumer contract

Also that warranties should become suspensive conditions- in other words the insurer will not be liable for losses occurring whilst there is a breach

Question 33

Under the insurance act 2015 what is the summary for breach of warranties

Answer 33

Basis of contract clauses are prohibited so any warranty in a policy must be expressly agreed

An insureds breach of warranty merely suspends the insurers liability under a policy

An insurer my not rely on a breach of warranty where the warranty relates to a risk that is irrelevant to the type of loss

Warranties are written into the policy

Question 34

What policy is an implied warranty found in

Answer 34

Marine insurance

Question 35

What is a condition precedent to the contract

Answer 35

These are conditions that must be fulfilled prior to the formation of the contract itself

Question 36

What 3 matter will render a policy void under policy conditions

*render - to give, provide (service or something)

Answer 36

1. No insurable interest
2. A fundamental mistake
3. An illegal contract

Question 37

What is meant by a continuing conditions precedent?

Answer 37

In motor insurance is it usual to have a condition relating to the roadworthiness of the vehicle. It is an ongoing requirement throughout the policy period to comply.

The insurer can set aside the whole contract if there is a breach

Question 38

What are the two options available for an insurer under a continuing conditions precedent

Answer 38

Avoid the policy from the date of breach

Waive its right and leave the whole contract in force

Question 39

What are conditions precedent to liability

Answer 39

Conditions that must be complied with if there is to be a valid claim.

If a condition precedent is not observed insurers can void liability but they may not repudiate the contract as a whole

Question 40

What is representation

Answer 40

Made during the negotiation period what is disclosed

are not part of the policy itself, but are made during the negotiating period

Question 41

What does there wall notice do

Answer 41

Shows any proposed changes in terms.

Premium to renew

Last years premium

Question 42

For renewals between 1 and 3 years what needs to be included in consumer renewal notices

Answer 42

The renewal premium

Last years premium

The total premium incl. any MTA (mid term adjustments)

A statement to say that the insured should shop around