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.

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