CII R05 Underwriting and Claims

Question 1

In the context of protection insurance, what does the principle of 'utmost good faith' (uberrima fides) require of the applicant?

Accepted Answer

The applicant must take reasonable care not to make a misrepresentation and must answer questions honestly and to the best of their knowledge

Answer

The applicant must disclose every detail of their medical history going back to birth

Answer

The insurer must accept every application regardless of risk

Answer

The applicant must provide a medical examination for all policies

Question 2

Under the Consumer Insurance (Disclosure and Representations) Act 2012, what remedy is available to an insurer if a consumer makes a careless misrepresentation?

Accepted Answer

The insurer can apply a proportionate remedy — what they would have done had the correct information been provided

Answer

The insurer can automatically void the policy and retain all premiums

Answer

The insurer has no remedy and must pay the claim in full

Answer

The insurer can impose a criminal penalty on the policyholder

Question 3

What is the purpose of medical underwriting in protection insurance?

Accepted Answer

To assess the health risks of the applicant and determine appropriate terms, premium loadings, or exclusions

Answer

To provide the applicant with a free health check

Answer

To diagnose medical conditions that the applicant is unaware of

Answer

To ensure the applicant qualifies for state benefits

Question 4

A 'moratorium' approach to underwriting pre-existing conditions means:

Accepted Answer

Conditions for which the applicant has not sought treatment or advice during a specified period (e.g., 5 years) before the policy start date will be covered

Answer

All pre-existing conditions are permanently excluded from cover

Answer

The insurer will cover all conditions immediately from day one

Answer

Pre-existing conditions are only covered after the policyholder reaches age 65

Question 5

What is 'evidence of insurability' and when might it be required?

Accepted Answer

It is medical or financial evidence required by the insurer to confirm the applicant is an acceptable risk, typically when exercising guaranteed insurability options or for high sums assured

Answer

It is proof that the applicant has previously held insurance

Answer

It is a certificate confirming the policyholder has no outstanding claims

Answer

It is a reference from the applicant's employer confirming their occupation

Question 6

An insurer discovers that a policyholder made a deliberate misrepresentation on their application. Under the Consumer Insurance Act 2012, the insurer can:

Accepted Answer

Avoid the contract, refuse the claim, and retain all premiums paid

Answer

Only apply a premium loading going forward

Answer

Reduce the claim by 50% as a penalty

Answer

Take no action as the policy has already been issued