8 - Material Circumstances

Question 1

What 2 things would affect the judgment of a prudent insurer in considering

Answer 1

A) whether or not to accept the risk

B) if willing to accept the risk; at what premium and on what terms and conditions

Question 2

Consumer. The proposer has a duty to:

Answer 2

take reasonable care not to make a misrepresentation

Question 3

Non-consumer. The proposer has a duty to:

Answer 3

Make a fair presentation of information relating to the risk of the insured

Question 4

Which 6 things do not need to be disclosed:

Answer 4

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

Question 5

What does the rehabilitation of offenders act 1974 as amended by the legal aid, sentencing and punishment of offenders act 2012 mean:

Answer 5

Depending on the period of time and upon the severity of the original sentence imposed convictions become spent and don’t need to be disclosed.

They are halved for those below 18 yrs of age at the DATE of the conviction except for custodial sentences of up to 6 months where the buffer period is 18 month

Question 6

What are the following rehabilitation period for custodial sentences 0-6 months?

Answer 6

Length of sentence+ 2 years

Question 7

What are the following rehabilitation period for custodial sentences 6-30 months?

Answer 7

Length of sentence+ 4 years

Question 8

What are the following rehabilitation period for custodial sentence 30months - 4 years

Answer 8

Length of sentence+ 7 years

Question 9

What are the following rehabilitation period for custodial sentence over 4 years?

Answer 9

Never spent

Question 10

What is the following rehabilitation period for non-custodial sentence community order and youth rehabilitation?

Answer 10

Length of sentence+ 1 year

Question 11

What is the following rehabilitation period for non-custodial sentence conditional charges?

Answer 11

Period of the order

Question 12

What is the CIDRA

Answer 12

Consumer Insurance (Disclosure and Representation) Act 2012: disclosure by private individuals is covered by CIDRA

Consumers are required to take legal care not to make a misrepresentation and the emphasis is on the insurer to ask the right questions in a clear way

Question 13

Disclosure of private individuals is covered by what

Answer 13

CIDRA

Question 14

Under CIDRA what happens if the misrepresentation was honest and reasonable

Answer 14

The insurer must pay the claim

Question 15

Under CIDRA what happens if the misrepresentation was careless

Answer 15

The insurer can act as it would have done if the question had been answered correctly. I.e charge a higher premium, apply exclusion, etc

Question 16

Under CIDRA what happens if the misrepresentation was deliberate or reckless

Answer 16

The insurer is entitled to treat the policy as void and decline all claims

Question 17

What is the Insurance Act 2015

Answer 17

To make a fair presentation of the risk involved; disclose every material circumstance that the insured knows or ought to know.
Making a fair presentation also means insurers need to take responsibility for asking questions and probing for info.

Question 18

Under the insurance act, what is a qualifying breach?

Answer 18

Where the insurer would not have entered into the contract at all or would have done it under different terms

Question 19

Under the insurance act if the breach is deliberate or reckless what can the insurer do:

Answer 19

A) void the contract and refuse to pay the claims

B) don’t have to return any of the premiums paid

Question 20

Under the insurance act what happens if the breach was not deliberate or reckless

Answer 20

1. If the insurer wouldn’t have written the risk at all they can void the contract but must return the period paid
2. If they would’ve charged a higher premium it can proportionality reduce any claims payments
3. If they would’ve added special terms they can but the insurer can’t seek to avoid the policy

Question 21

What is a peril

Answer 21

The event giving rise to the loss itself

Question 22

What is a hazard

Answer 22

The factor that might alter the frequency and severity of the peril occurring

Question 23

What is a physical hazard?

Answer 23

Relates to the physical characteristics of the risk

Question 24

What are the physical hazards of fire insurance?

Answer 24

A) construction of the building
B) provision of fire fighting equipment
C) trade processes

Question 25

What are the physical hazards of theft insurance

Answer 25

A) construction of the building
B) security feature
C) contents in the building

Question 26

What are the physical hazards for the motor?

Answer 26

A) age of the driver
B) make and model of the vehicle
C) place it’s kept
D) the use of the vehicle

Question 27

What are the physical hazards for EL?

Answer 27

Industrial processed in a factory ie guarding of machinery

Question 28

What are the physical hazards for personal accident and sickness?

Answer 28

A) proposers occupation

B) dangerous pastimes

Question 29

Name the most serious example of poor moral hazard

Answer 29

False or exaggerated claims

Question 30

What is a common example of poor moral hazard?

Answer 30

Lack of care of the insured i.e. lack of guard for employees or physical property

Question 31

Why do insurers use proposal forms

Answer 31

It is the most convenient, speedy, and cost effective

Question 32

What are the 6 general questions on a proposal form?

Answer 32

A) Name 
B) Address
C) Occupation
D) Age
E) Details of past insurance 
F) Details of other insurances

Question 33

What 4 specific things are needed to quote on a proposal form

Answer 33

Detail of previous claims

Period of insurance

The subject matter of the insurance

Sum insured ( the rate the premium is based on- a rate per cent £100 or per Mille £1,000)

Question 34

What are specific questions that are risk specific for Motor?

Answer 34

Age of driver

Criminal prosecutions

Question 35

What are specific questions that are risk specific for Liability?

Answer 35

Noise risks
Pollution hazards
Work away from the premises
Contracts entered into

Question 36

What are specific questions that are risk specific for fire?

Answer 36

Manufacturing process
Storage arrangements
Building construction

Question 37

What are specific questions that are risk specific for Theft?

Answer 37

Breakdown of types of stock

Security precautions

Question 38

Proposal forms are used by underwriters as a means of obtaining material facts because:
A) it is a regulatory requirement
B) it’s convenient and cost effective
C) it prevents misrepresentation by the proposer
D) it provides an opportunity for collecting product and design information

Answer 38

it’s convenient and cost effective

Question 39

What is a Market reform contract?

Answer 39

Carries full details of the risk in a recognised format and is often used in the London market
Originally part of the slip used at Lloyd’s

Question 40

What are the three elements of the market reform contract?

Answer 40

Meetings with the client - usual in commercial

Writing to the proposer- personal

Internet search

Question 41

What is the purpose of a proposal form?

Answer 41

To gather all material facts for deciding on acceptance and terms for the risk