Chapter 5 - Good Faith

Question 1

What sort of product is insurance? Tangible or Intangible?

Answer 1

Intangible

Question 2

What duty do consumers have under the Consumer Insurance Disclosure & Representations Act 2012

Answer 2

Duty to take reasonable care not to make a misrepresentation

Question 3

What did the Insurance Act 2015 introduce?

Answer 3

Duty to make fair presentation of a risk for a non-consumer contracts

Question 4

Who does the duty of good faith apply too?

Answer 4

Both insured and insurer

Question 5

What must the insurer disclose as an act of good faith?

Answer 5

Only taking on risks which the insurer is registered to accept
Ensuring statements are true and not misleading
Entitlement to discounts etc.

Question 6

What is the duty of disclosure?

Answer 6

In all insurance negotiations there is a duty to disclose material circumstances, particularly at the proposal stage.

Question 7

When is the duty of disclosure revived?

Answer 7

At each renewal date unless it is a continuing one.

If there is an alteration to the policy

Question 8

Who does the Consumer Insurance Disclosure &Representations Act 2012 apply to?

Answer 8

Consumers not commercial customers

Question 9

What defines a consumer under the act?

Answer 9

Someone who takes out insurance wholly unrelated to the individuals trade.

Question 10

Who does the Insurance act 2015 apply to?

Answer 10

Non-consumer i.e. commercial customers

Question 11

What must the insured disclose under the insurance act?

Answer 11

Material circumstances the insured knows or ought to know
Disclosure in a manner which could be reasonably clear and accessible to insurers
Facts substantially correct, representations of belief made in good faith

Question 12

What is a measure of the insured’s knowledge if they are an individual?

Answer 12

What is known to them as an individual

What individuals responsible for insurance know

Question 13

What is a measure of the insurers’ knowledge?

Answer 13

If the employee or agent of the insurer knows it and ought to have passed it on
The relevant information is held by the insurer and is readily available.
Common knowledge
What insurer of that class of insurance reasonably expected to know

Question 14

What was outlawed in the Insurance act 2015?

Answer 14

The basis of contract clauses

Question 15

What do you have to do to contract out under the Insurance Act 2015?

Answer 15

Take sufficient steps to draw the disadvantageous term to the insured’s attention

Clear and unambiguous

Question 16

What policies have a duty of disclosure start at renewal?

Answer 16

General (non-life) policies

Question 17

What are the duty of disclosure rules in regards to life and pension policies?

Answer 17

The duty of disclosure ceases once the policy is in force, even if a material fact were to change it does not need to be declared.

Question 18

What policies generally have a continuing requirement of duty of disclosure?

Answer 18

Commercial property

Motor insurances

Public liability insurances.

Question 19

Does the duty of disclosure revive on alteration of a policy?

Answer 19

Yes if there is a need for an endorsement to the policy.

Question 20

What happens if the consumer does not provide material circumstance or a question asked by the insurer does not follow it up?

Answer 20

The Insurer has waived its right to the information and cannot claim there has been a breach of duty of disclosure.

Question 21

What is meant by the term Ab Initio?

Answer 21

From the beginning

Question 22

What is Estoppel?

Answer 22

This is a bar or impediment that precludes a person from asserting a fact or right eg an insurer being estopped from avoiding a contract for breach of good faith if they have acted on the basis that the contract is valid,

Question 23

What are some examples of physical hazards?

Answer 23

Construction, nature of use, heating, electrical systems

Question 24

What are some examples of moral hazards?

Answer 24

Criminal convictions, lack of good management, excessive, willful carelessness

Question 25

What does the Insurance Act 2015 state about material circumstances?

Answer 25

A circumstance or representation is material if it would influence the judgement of a prudent insurer in determining whether to take the risk and if so on what terms

Question 26

What facts do not require disclosure?

Answer 26

Facts of law,
Facts of public knowledge
Facts that lessen the risk
Facts where the insurer has waived its right
Facts a survey should reveal
Facts that the insurer does not know.
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Question 27

What facts do not require disclosure in non-consumer policies?

Answer 27

Facts that diminish the risk
Facts the insurer knows,
Facts the insurer ought to know,
Facts the insurer is presumed to know
Facts that the insurer has waived its rights.
Facts of law
Facts a survey should have revealed
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Question 28

What did the Legal Aid, Sentencing and punishment of offenders act 2012 (LASPO) change?

Answer 28

The rehabilitation periods now contains a buffer period after the custodial sentence.

Question 29

What is the buffer period of a prison sentence of 0 -6 months?

Answer 29

2 years

Question 30

Buffer period for 6 - 30 months?

Answer 30

4 years

Question 31

Buffer period for 30 months - 4 years?

Answer 31

7 years

Question 32

Buffer period over 4 years?

Answer 32

Never spent

Question 33

Buffer period for a non-custodial sentence such as fines or community orders?

Answer 33

1 year

Question 34

Conditional discharge buffer?

Answer 34

Period of the order.

Question 35

Are any claims payable if a policy is Ab Initio?

Answer 35

No claims will be payable

Question 36

What happens if the non-disclosure was fraudulent?

Answer 36

The insurer may keep the premium and sue for damages

Question 37

What can the insurer not do?

Answer 37

Refuse payment of a particular claim, but leave the policy in force for the future.

Question 38

What is the FOS approach to non-disclosure?

Answer 38

Three stage questions

Was there a clear question and was it answered correctly?

Was the insurer induced?

What kind of non-disclosure was it?

Question 39

What does the Insurance Conduct of Business Sourcebook say about the rejection of claims?

Answer 39

Insurers must not unreasonably reject a claim
Non-negligent misrepresentation of material circumstances by a consumer will be considered unreasonable grounds for refusing to pay a claim.

Question 40

What happens if the consumer proposer purposefully or recklessly answers questions wrong?

Answer 40

The insurer is entitled to avoid the policy ab initio.

Question 41

What does the insurer have to do if they were misrepresented information but would have taken the policy on at a higher premium?

Answer 41

They are able to reduce the claim proportionately, meaning the insurer would only have to pay a certain percentage of the claim rather than the full amount.

Question 42

What is the calculation for reducing proportionality?

Answer 42

Loss multiplied by premium actually charged / higher premium

Question 43

What are the rules of disclosure in regards to compulsory motor insurance?

Answer 43

The insurer must pay compensation for injury and property damage for the third party, then claim back the amount from the insured.

Question 44

What constitutes knowledge for non individual insureds

Answer 44

What senior management know or their insurance team know or what would be revealed by reasonable search

What those responsible for insurance know