CII IF5 cheat sheet

Utmost good faith (uberrimae fidei) is a duty on both parties; the insured's duty to disclose material facts was codified by the Insurance Act 2015 for non-consumer contracts, replacing the common-law duty of full disclosure.

Material circumstance (Insurance Act 2015, s.7): one that would influence a prudent insurer's judgment on whether to take the risk and on what terms; the insured need not disclose matters it neither knew nor ought to have known.

Insurable interest: Life Assurance Act 1774 requires interest at inception for life policies; Marine Insurance Act 1906 s.4 requires interest at time of loss for marine; indemnity policies require interest at the time of loss.

Indemnity principle: the insured is restored to its pre-loss financial position, no better and no worse; valued policies, reinstatement, new-for-old and betterment are recognised exceptions or adjustments.

Subrogation (MIA 1906 s.79) transfers the insured's recovery rights against third parties to the indemnifying insurer, limited to the amount paid; it cannot be contracted out of to prejudice the insured.

Contribution between insurers covering the same interest, peril and period apportions loss, commonly pro rata by sums insured or by independent liability; double insurance arises where total cover exceeds the loss.

Proximate cause is the dominant, effective cause of loss; where perils are concurrent, exclusions are construed narrowly against the insurer (contra proferentem) and ambiguity favours the insured.

Consumer Insurance (Disclosure and Representations) Act 2012 replaced the consumer duty of disclosure with a duty to take reasonable care not to make a misrepresentation; remedies depend on whether the breach was deliberate, reckless or careless.

A contract requires offer, acceptance, consideration (the premium) and intention to create legal relations; cover usually begins when the proposal is accepted, subject to any condition precedent.

Insurance Act 2015 remedies for breach of the duty of fair presentation: proportionate remedy for non-deliberate breaches, and avoidance plus retention of premium for deliberate or reckless breaches.

The Insurance Act 2015 abolished the automatic avoidance remedy for breach of warranty; instead the insurer's liability is suspended during the period of breach and resumes afterwards, subject to any express term.

Terms are classified as conditions (breach allows termination and may defeat the claim), warranties (suspensory under IA 2015), innominate/intermediate terms and mere representations.

Consumer Insurance Act 2012 remedies for misrepresentation: proportionate remedy for careless misrepresentation, avoidance plus no return of premium for deliberate or reckless misrepresentation.

The Insurance Act 2015 transparency requirements: an insurer cannot rely on a term disadvantageous to the insured unless it has taken sufficient steps to draw the term to the insured's attention before the contract is entered.

A condition precedent to liability must be satisfied before the insurer's obligation to pay arises; a condition subsequent may allow the insurer to terminate or recover.

The Third Parties (Rights against Insurers) Act 2010 allows a third party to claim directly against the insurer where the insured is insolvent, once liability is established.

The Financial Services and Markets Act 2000 (FSMA) establishes the FCA and PRA; the FCA regulates conduct for all firms and prudential matters for non-PRA-authorised firms, while the PRA regulates prudential matters for banks and insurers.

The FCA's statutory objectives are consumer protection, integrity of the financial system and competition; the PRA's objectives are general safety and soundness and, for insurers, policyholder protection.

The Senior Managers and Certification Regime (SM&CR) imposes prescribed responsibilities, a duty of responsibility and fitness and propriety requirements on senior managers and certified staff.

The Insurance Distribution Directive (IDD) is implemented in the UK through the FCA's Insurance: Conduct of Business sourcebook (ICOBS) and the IDD Regulations 2018, covering product oversight, demands-and-needs and conflicts of interest.

The FCA's Consumer Duty (PRIN 2A) requires firms to act to deliver good outcomes for retail customers across products and services, price and value, consumer understanding and consumer support.

The Financial Ombudsman Service (FOS) handles complaints from eligible complainants about regulated firms; the award limit is £430,000 for complaints referred on or after 1 April 2024 (previously £375,000).

The Financial Services Compensation Scheme (FSCS) protects policyholders of failed insurers, generally covering 100% of compulsory insurance claims and 90% of other general insurance claims, subject to limits.

Insurance intermediaries must be authorised or appointed representatives; they owe duties of disclosure, best execution in the client's interest and must hold professional indemnity cover under ICOBS.

Notification: the insured must notify claims promptly in accordance with policy terms; late notification may be a breach of condition, but the insurer must show prejudice under the Insurance Act 2015.

Claims handling duties: the insurer must handle claims promptly and fairly, provide reasonable guidance, not reject claims unreasonably and explain any rejection (ICOBS 8 and FCA Consumer Duty).

The burden of proving a loss falls within the cover rests on the insured; the burden of proving an exclusion applies rests on the insurer.

Fraudulent claims: under the Insurance Act 2015, the insurer may refuse the fraudulent claim and recover sums already paid; it may also treat the whole contract as terminated and retain premium.

The Financial Ombudsman Service can award compensation up to £430,000 and make directions; it decides cases on the basis of what is fair and reasonable in the circumstances, not strictly on law.

Limitation periods: contract claims generally have a six-year limitation period from the date of breach (twelve years for deeds); the Limitation Act 1980 applies to insurance claims.

Alternative dispute resolution includes FOS, mediation and arbitration; arbitration awards are enforceable under the Arbitration Act 1996 and are generally final and binding.

Complaints must be acknowledged promptly and resolved within eight weeks; if unresolved, the complainant may refer the matter to FOS within six months of the firm's final response.