Page 30 - India Insurance Report 2023- BIMTECH

18 India Insurance Report - Series II

is to be determined in the light of all the relevant circumstances, e.g., how clear and how
specific the insurer’s questions were; how distinctly the insurer communicated the importance
of answering questions related with the renewal or variation of a consumer insurance contract
and the consequences of failing to do so. Similarly, the standard of care required is that of a
reasonable consumer. Suppose the insurer was, or ought to have been, aware of any particular
characteristics or circumstances of the actual consumer; those are to be considered. A
misrepresentation made dishonestly will be deemed a lack of reasonable care.

The concept of qualifying misrepresentation has been introduced as a measure of remedy
that the insurer has against the insured for misrepresentation. A qualifying misrepresentation
takes place when there was a breach to take reasonable care not to make a misrepresentation,
and the insurer shows that without the misrepresentation, that insurer would not have
entered into the contract (or agreed to the variation) at all or would have done so only on
different terms (2012 Act and 2015 Act). A qualifying misrepresentation is either (a) deliberate
or reckless - the remedy to an insurer may be to avoid the contract and refuse all claims, and
need not return any of the premiums received by it., or (b) careless - any misrepresentation
that is not deliberate or reckless is called careless or innocent negligence. Deliberate or
reckless misrepresentation takes place when the consumer knows that the information
furnished is untrue or misleading or does not care whether or not it is untrue or misleading,
and (c) knows that the matter to which the misrepresentation is related is relevant to the
insurer, or doesn’t care whether or not it is relevant to the insurer. However, the insurer
has to prove that the qualifying misrepresentation is reckless or deliberate. The insurer’s
remedies have been laid down in Schedule 1 of the 2012 and 2015 acts. The insurer may
avoid the contract and decline all claims in case of deliberate or reckless misrepresentations.
It need not pay back the premium except to the extent (if any) that it would be unfair to the
consumer to retain them. In non-consumer insurance contracts, the insurers need not return
any of the premiums paid. In careless misrepresentation, the insurer’s remedies are based
on what it would have done if the consumer had complied with the duty, i.e., to take
reasonable care not to make a misrepresentation or fair representation of the risk. The
insurer may avoid the contract and refuse all claims If the insurer would not have entered
into the consumer insurance contract on any terms. However, the insurer must return the
premiums paid. In another scenario, in the absence of a qualifying breach, If the insurer
would have entered into the consumer insurance contract but on different terms (other
than terms relating to the premium), the contract is to be treated as if it had been entered
into on those different terms if the insurer so requires. Additionally, the insurer may reduce
proportionately (the proportion of premium actually charged vis-a-vis the higher premium
to be charged) the amount to be paid on a claim if the insurer would have entered into the
insurance contract (whether the terms relating to matters other than the premium would
have been the same or different), but would have charged a higher premium.
Further, the Insurance Act 2015 (IA 2015) abolished Section 18-Disclosure by the assured;
Section -19 –Disclosure of Agent effecting Insurance and Section 20 – Representations pending
negotiations of the Marine Insurance Act 1906 and introduced the concept of ‘The duty of
fair presentation of the risk’. The duty mandates that before a contract of insurance is entered