MATERIAL FACTS IN INSURANCE


MATERIAL FACTS IN INSURANCE
 Material simple truth is every circumstance or information, which would influence the judgment of a prudent insurer in assessing the risk. Or those circumstances which influence the insurer's decision to simply accept or refuse the chance or which affect the fixing of the premium or the terms and conditions of the contract, must be disclosed. A material simple truth is one which would have influenced the judgment of a prudent insurer in deciding whether he would accept the chance entirely or partly and, if so, at what level of premium. The materiality of a fact depends upon the application form of this test to this circumstance of the case as at the date that the fact should have now been communicated. Material facts might have a bearing on the physical hazard or on the moral hazard, or they could show when a loss occurs the insurer's liability is apt to be greater than would normally be expected.
 FACTS, WHICH MUST BE DISCLOSED (i) Facts, which show a risk represents a greater exposure than will be expected from its nature e.g., the fact that a part of the building is being employed for storage of inflammable materials. (ii) External factors that produce the chance greater than normal e.g. the building is located close to a warehouse storing explosive material. (iii) Facts, which would make the total amount of loss greater than that normally expected e.g. there's no segregation of hazardous goods from non-hazardous goods in the storage facility. (iv) History of Insurance (a) Information on previous losses and claims (b) if any Insurance Company has earlier declined to insure the property and the special condition imposed by another insurers; if any. (v) The existence of other insurances. (vi) Full facts relating to the description of the subject matter of Insurance.


 EXAMPLES OF MATERIAL FACTS (a) In Fire Insurance: The construction of the building, the character of its use i.e. whether it's of concrete or Kucha - having thatched roofing and whether it's being employed for residential purposes or as a godown, whether fire fighting equipment can be obtained or not. (b) In Motor Insurance: The type of vehicle, the purpose of its use, its age (Model), Cubic capacity and the fact that the driver includes a consistently bad driving record. (c) In Marine Insurance: Kind of packing, mode of carriage, name of carrier, nature of goods, the route. (d) In Personal Accident Insurance: Age, height, weight, occupation, previous medical history and occupation especially when it is likely to improve the chance of an accident. Proclivity of substance abuse has to be disclosed as well- eg. alcohol or drug addiction. (e) Burglary Insurance: Nature of stock, value of stock, type of security precautions taken. 22 PP-IL&P The above mentioned are simply indicatory of the sort of material facts that must definitely be disclosed. Information on previous losses is a material fact that's to be disclosed in most cases.

Comments

Post a Comment

Popular posts from this blog

BASIC CATEGORIES OF RISK

BASIC CATEGORIES OF RISK With regards insurability, there are basically two categories of risks; 1. Speculative or dynamic risk; and 2. Pure or static risk Speculative or Dynamic Risk Speculative (dynamic) risk is a situation in which either profit OR loss is possible. Examples of speculative risks are betting on a horse race, investing in stocks/bonds and real estate. In the business level, in the daily Lesson 1  Understanding and Managing Risk  5 conduct of its affairs, every business establishment faces decisions that entail an element of risk. The decision to venture into a new market, purchase new equipments, diversify on the existing product line, expand or contract areas of operations, commit more to advertising, borrow additional capital, etc., carry risks inherent to the business. The outcome of such speculative risk is either beneficial (profitable) or loss. Speculative risk is uninsurable. Pure or Static Risk ...
Read more

HOW PRINCIPLE OF CONTRIBUTION WORKS IN INSURANCE

HOW PRINCIPLE OF CONTRIBUTION WORKS IN INSURANCE Principle of contribution is implemented when multiple insurance policies are covering the same property or loss, the total payment for actual loss is proportionally divided among all insurance companies. In insurance, the principle of contribution in born from principle of indemnity. It is used to will maintain continued existence to preserve the principle of indemnity Therefore, principle of contribution only applies to those insurance contracts which are contracts of indemnity. In fact, however, there would have been possibilities of getting more than the actual loss had the principle of contribution not been established with legal force. Just to give a probability, the insured would have received a claim in full, numbers of times, by affecting numbers of policies with different insurers thereby defeating entirely the principle of indemnity. Like subrogation, therefore, has come up the principle of contributi...
Read more

FEATURES OF INSURANCE CONTRACT

FEATURES OF INSURANCE CONTRACT Though all contracts share fundamental concepts and basic elements, insurance contracts typically possess a number of characteristics not widely found in other types of contractual agreements. The most common of these features are listed here: (a) Aleatory If one party to a contract might receive considerably more in value than he or she gives up under the terms of the agreement, the contract is said to be aleatory. Insurance contracts are of this type because, depending upon chance or any number of uncertain outcomes, the insured (or his or her beneficiaries) may receive substantially more in claim proceeds than was paid to the insurance company in premium dollars. On the other hand, the insurer could ultimately receive significantly more money than the insured party if a claim is never filed. (b) Adhesion In a contract of adhesion, one party draws up the contract in its entirety and presents it to the other party on a 'take it or leave it' ba...
Read more