Insurance contracts
Proposal and formation
A proposal form gathers information; it is not automatically the offer. Cover may begin on a cover note or temporary contract. The insurer must be given a fair presentation of the risk. For consumers, CIDRA 2012 requires reasonable care to answer questions honestly and accurately; there is no general duty to volunteer unasked information. For commercial insureds, Insurance Act 2015 s.3 requires fair presentation: disclose every material circumstance the insured knows or ought to know, or give sufficient information to put a prudent insurer on notice to make further enquiries. Knowledge includes senior management and those responsible for arranging cover.
Policy terms
Read terms in categories: definitions, insuring clause, exclusions, conditions, warranties. Conditions precedent to liability (e.g. notify claims within a specified time) must be satisfied before the insurer pays. Warranties are promissory; breach suspends cover. The Insurance Act 2015 voids basis clauses and restricts 'contracting out' for non-consumer contracts.
Claims
The insured must notify, cooperate, provide proof and mitigate loss. The insurer must handle claims fairly under ICOBS and pay valid claims promptly. Fraud is serious: a fraudulent claim can forfeit the whole claim, and the insurer may recover sums already paid and terminate the policy. Third Parties (Rights against Insurers) Act 2010 allows a claimant to pursue the insurer where the insured is insolvent.
Worked example
A consumer omits a medical condition on a travel proposal. Had it been disclosed, the insurer would have charged £1,500 instead of £1,000, but would still have covered the trip. A £3,000 medical claim arises. The non-disclosure is careless, not deliberate. Under CIDRA the remedy is proportionate: £3,000 × £1,000/£1,500 = £2,000. If the insurer would have declined the risk altogether, it could avoid the policy and return the premium; if it would have imposed an exclusion, the claim would be assessed as if that exclusion applied.
Traps
Do not assume avoidance is the remedy for every consumer non-disclosure. Do not confuse a warranty with a condition precedent. A late notification may be a condition precedent, but the insurer still has to rely on the term as drafted. Do not ignore the 'knowledge' rules for commercial insureds: the duty is not limited to the person who signed the form. Fraud findings apply to the whole claim, not just the exaggerated part.