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5/6 W01/March 2017 Award in General Insurance

Motor insurance
There is usually a policy condition that requires continuing disclosure of all material changes by the
policyholder, during the term of the policy.
Public liability insurance
The continuing requirement for disclosure for this type of insurance arises from the fact that insurers
tightly define the nature of the business that is covered in the policy. This means that if there is any
extension to the company’s activities then these must be notified to the insurer.

B4D On alteration

During the term of a general policy, it may be necessary to change the terms of the policy. The
policyholder may wish to increase the sum insured, change the description of the property or add
another driver to a motor policy. Where a change results in the need for an endorsement to the policy,
the duty of disclosure is revived in relation to that change.

B4E Limitation of an insurer’s right to information
In many cases it is the completion of a proposal form by the proposer that brings about insurance. The
insurer constructs the proposal form with the intention that it will draw out all the relevant information
relating to the risk.

If a question is asked, but the proposer only provides partial information in response and the insurer
does not seek further details, then the insurer is deemed to have waived its rights regarding this
information. The proposer is not considered to have failed to disclose a material fact; this applies to
5 answers left blank on proposal forms or a vague description of a business.
Chapter If an insurer clarifies what it means by a ‘material fact’ by defining exactly what is required in answer to a

question on a proposal form, it is unable to claim at a later date that it required wider or further
disclosure. In effect, it cannot claim that there has been a failure to disclose something material. This is
the case in any situation where the insurer has requested what they regard as relevant information
relating to a defined period.
Summary of disclosure requirements once a policy is in force Reference copy for CII Face to Face Training
• In the absence of a specific policy condition duty of disclosure will revive only at the time of
negotiation prior to renewal.
• There are some policies that require continuing disclosure of all material facts.
• For certain types of business, insurers limit the disclosure requirements that are ongoing by specifying
what they consider to be important.
• Any fact about the risk that requires an endorsement to the policy must be notified if the full cover is
to continue.
• Insurers are considered to have waived their right to information if they enquire about a fact but do not
follow it up, and cannot refuse to pay a claim in these circumstances.

C Material facts

We turn now to the question of what, exactly, is meant by a material fact.
The standard definition, which still applies today, is provided by s.7 of the IA 2015. This states that every
circumstance is material:
if it would influence the judgment of a prudent insurer in determining whether to take the risk and, if so, on
what terms.

C1 Features of material facts

The courts test whether a fact is material by looking at it from a prudent insurer’s point of view. They do
not consider the policyholder’s point of view or that of the particular insurer involved.

Question 5.2
The construction of a building would be a material fact in respect of a fire policy. What other facts might a prudent
insurer consider material to a fire policy on a commercial building?