5 - Good faith & Disclosure Flashcards
(21 cards)
(1) A life insurance policyholder has suffered two strokes but has not informed the insurer of her change of health. This is because:
Self-test questions
a. The duty of disclosure ends at inception of the policy
b. The duty of disclosure only applies at the policy renewal date
c. The duty of disclose never applies to life insurance contracts
d. Her health is not relevant information
(46) Joe lives in a converted, thatched roof, timber-built barn situated in a rural location. Two years ago he was convicted and fined for handling stolen goods. He applies to his insurer, a specialist underwriter of timber and thatch properties for household insurance, but his proposal is still declined. What is the most likely cause for this declinature?
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A. His conviction and fine two years ago.
B. The construction of the property.
C. The remote location of the property.
D. The property is a conversion
(2) Janette, a motor insurance policyholder, has been diagnosed with epilepsy. It is true to say that:
Self-test questions
a. As long as she was diagnosed after inception, she has no duty of disclosure
b. Her epilepsy is relevant information and she has a duty to disclose this to her insurer
c. It is her choice whether she informs her insurer
d. She only has a duty of disclosure if directed to do so by her GP.
(3) Why might an insurer require continuing disclosure for public liability contracts?
Self-test questions
a. To ensure changes to business activity are notified
b. To ensure premiums can be increased
c. To avoid lengthy discussions at renewal
d. To identify opportunities for cross selling.
(47) To whom does the duty of good faith apply in insurance contracts?
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A. The proposer only
B. The insurer only
C. Both the proposer and the insurer
D. Any interested third party
(4) Susie completed a proposal form for building and contents insurance. She said she provided only partial information as she could not recall full details of a claim she made last year. The insurer asks no further questions and the policy is put on risk. In
this example:
Self-test questions
a. The policy is null and void and any future claim will be refused
b. Any claim may be reduced as a result of the missing information
c. Susie is considered to be in breach of contract
d. The insurer has waived its rights about the missing information
(48) Tony owns an electrical shop and is arranging insurance with a new insurer. His shop is of non-standard construction and is protected by a central station alarm. He has had two burglaries in
the last 12 months. Police have warned that the theft of LED televisions has increased substantially in recent months. Which of these facts does Tony NOT need to disclose to the new insurer?
iF1 Exam 2023
A. The construction of the premises.
B. The type of stock sold.
C. The presence of the central station alarm.
D. The two previous burglaries.
(5) When Sakon applied for his motor insurance, in response to a question on the proposal form, he disclosed that there was a family history of illness. The insurer took no further action. In the event of a claim, it is most likely that the claim would be:
Self-test questions
a. Met in full as Sakon had provided enough information on the proposal
b. Declined as Sakon hadn’t supplied full information
c. Met in full as Sakon’s insurer had not sought further details
d. Subject to Sakon having to provide further information at the time of the claim
(49) As a result of misrepresentation, a policy is being cancelled on an ab initio basis. What does this mean?
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A. Cover will cease after a specified period of time.
B. The current claim will be settled, following which the policy will cease.
C. The policy will be treated as though the contract was never established.
D. A proportionate refund of premiums will be granted.
(6) Material circumstances are those which:
Self-test questions
a. Are important to a prudent underwriter in determining the nature of the risk, this being determined at the sole discretion of the underwriter.
b. Directly relate to the insurance policy.
c. Influence the judgment of a prudent insurer in determining whether to take the risk and, if so, on what terms.
d. Are relevant to the insurance policy, as determined by an average person of average intelligence.
(50) Sana takes out a whole of life policy with insurer X and an annual personal accident and sickness policy with insurer Y. She is diagnosed 10 months later with a heart condition that will require
surgery in 6 months’ time. Which of her insurers, if either, should she notify of this health change at the anniversary dates of her policies?
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A. Both insurers.
B. Insurer X only.
C. Insurer Y only.
D. Neither insurer.
(7) When applying for an insurance policy, a proposer is under an obligation to disclose any material circumstances. This would include:
Self-test questions
a. Matters of law
b. Information which the insurer ought to know
c. Information that is outside the scope of the specific questions asked by the insurer.
d. Details of the proposer’s circumstances that relate to the insurance being applied for.
(51) When David submitted a proposal for private medical insurance, he forgot to answer one of the medical questions. The insurer did NOT query the missing information and the policy is now in force. This is NOT regarded as non-disclosure because
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A. David could not be expected to know the answer
B. David intended to provide the insurer with the information
C. the insurer did not request a medical report from David’s general practitioner (GP)
D. the insurer has waived its right to the information
(8) BB Insurance Ltd have received a claim on a buildings insurance policy where the insured had deliberately and fraudulently failed to disclose details of existing subsidence. Had this been disclosed, insurance cover would not have been offered. As a result, BB Insurance Ltd are most likely to:
Self-test questions
a. Refuse the claim, set the whole contract aside, and retain the premium
b. Pay the claim and continue the policy, but refuse future claims relating to subsidence
c. Refuse the claim, cancel the policy and refund the premiums paid
d. Pay the claim and continue the policy as before
(52) An insurer proves an insured deliberately answered a question of fact wrongly on the proposal form to reduce the premium. What is the insurer most likely action the insurer will take on discovery of this information?
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A. Apply additional terms from inception only
B. Apply additional terms from the date of discovery only
C. Avoid the policy ab initio
D. Avoid the policy from the date of discovery only
(9) An insurance claim is settled even though the insurer is aware that information was fraudulently misrepresented when the insured bought the policy. The type of insurance policy is most likely to be:
Self-test questions
a. Home contents insurance
b. Compulsory motor insurance
c. Buildings insurance
d. Medical expenses insurance
(52) Material circumstances are considered by an underwriter to
iF1 Exam 2023
A. analyse the likely frequency and severity of catastrophic events that might impact on a class of business.
B. assess the level of risk of an insurance proposal to determine the cover that can be offered and at what premium.
C. negotiate and settle a claim made by the insured under an insurance policy.
D. provide the statistical analysis required to comply with reporting requirements to the industry regulator.
(10) An insurer must settle a claim even though there was a breach of good faith at the outset. If they had known the truth about the risk, they would not have entered into the contract. They must pay however because they have received a claim:
Self-test questions
a. For personal injury with a compulsory excess
b. Where it is not possible to apportion blame
c. For third party injury and property caused by moral hazard
d. For third party injury and property made compulsory by statute
(54) Tom wishes to insure his joinery business. The premises are heated by an unguarded wood-burning stove, large stocks of flammable paints and solvents are held and there has been a history of malicious damage attacks on the premises. The premises are located within a vulnerable flood area although no flooding has occurred. Which of these facts does Tom NOT need to disclose to his insurer?
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A. Malicious damage attacks
B. Method of heating
C. Stock level of flammable liquids
D. Vulnerable flood area location
(55) Who, if anyone, has a duty of fair presentation when a commercial insurance policy is renewed?
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A. The duty of fair presentation does not apply at renewal
B. The insurer only
C. The policyholder only
D. Both the insurer and the policyholder
(56) Ruth is opening a florist shop within an area previously affected by riots. The shop suffered no damage, is protected by a sprinkler system and is sited only 50 metres away from a police station.
Which of these facts, if any, must she disclose to the insurer when submitting a proposal for commercial insurance?
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A. None of the facts
B. The proximity of the police station
C. The presence of the sprinkler system
D. The previous riots in the area
