You are a claims handler for an insurer specialising in household insurance. One of the policyholders has home insurance, which includes buildings and contents cover. When the insurance policy was incepted the policyholder confirmed the property was their permanent residence. The policyholder notifies you of a claim for water damage to the property and personal possessions. Whilst investigating the claim, you discover the following: The policyholder rents out the property on short-term lets, during which they temporarily vacate the property. However, the policyholder has never informed the insurer of this. The personal possessions are owned by a guest who had rented the property for the weekend. The policyholder has received a criminal conviction for burglary, although this conviction occurred after the inception of the policy. Discuss the effect on both the policy and the claim of the policyholder failing to inform the insurer of the criminal conviction.

Insurance contracts are formulated based on good faith. This means that both the insured and insurer should act honestly and diligently. However, the failure of the policyholder to report a criminal record on the part of the policyholder should not have an effect on the policy because the criminal record was obtained after signing the policy agreement. Implicitly, this means that, by the time of signing the insurance contract, the claimant acted truthfully and honestly.

This example draws relevance from the Consumer Insurance (Disclosure and information) Act of 2012, which abolished the pre-contractual duty for policyholders to state all material facts at the time of signing their insurance contracts and replaced it with the duty of taking reasonable care not to make materials misstatements. This law was introduced to modernize contractual law and make it more relevant to the operationalization of commercial insurance contracts. The Chartered Insurance Institute says, from this piece of legislation, policyholders have two main duties:

  • To misrepresent matters relating to the insurance contract – a duty to tell the truth
  • To disclose all material facts relating to the insurance contract

While the policy may not be considerably affected by the claimant’s newly acquired criminal history, future contracts entered by the policyholder may be affected by the same development because it would form a basis for a reassessment of risks. In other words, the criminal history raises the policyholder’s risk profile, thereby affecting the risk profile of future policies.

This development may provide grounds for charging higher premiums than those who do not have such a criminal record or minimizing the scope of the insurance policy. Some insurance companies may also refrain from insuring people who have a proven criminal record as a matter of policy. In certain circumstances, landlords could also decline to rent out their houses to people who have a criminal record. However, in the present case, the criminal history does not have an effect on the existing policy or policyholder because it was obtained after signing the contract.

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Academic.Tips. (2022) 'You are a claims handler for an insurer specialising in household insurance. One of the policyholders has home insurance, which includes buildings and contents cover. When the insurance policy was incepted the policyholder confirmed the property was their permanent residence. The policyholder notifies you of a claim for water damage to the property and personal possessions. Whilst investigating the claim, you discover the following: The policyholder rents out the property on short-term lets, during which they temporarily vacate the property. However, the policyholder has never informed the insurer of this. The personal possessions are owned by a guest who had rented the property for the weekend. The policyholder has received a criminal conviction for burglary, although this conviction occurred after the inception of the policy. Discuss the effect on both the policy and the claim of the policyholder failing to inform the insurer of the criminal conviction'. 9 October.

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Academic.Tips. (2022, October 9). You are a claims handler for an insurer specialising in household insurance. One of the policyholders has home insurance, which includes buildings and contents cover. When the insurance policy was incepted the policyholder confirmed the property was their permanent residence. The policyholder notifies you of a claim for water damage to the property and personal possessions. Whilst investigating the claim, you discover the following: The policyholder rents out the property on short-term lets, during which they temporarily vacate the property. However, the policyholder has never informed the insurer of this. The personal possessions are owned by a guest who had rented the property for the weekend. The policyholder has received a criminal conviction for burglary, although this conviction occurred after the inception of the policy. Discuss the effect on both the policy and the claim of the policyholder failing to inform the insurer of the criminal conviction. https://academic.tips/question/you-are-a-claims-handler-for-an-insurer-specialising-in-household-insurance-one-of-the-policyholders-has-home-insurance-which-includes-buildings-and-contents-cover-when-the-insurance-policy-was-inc/

References

Academic.Tips. 2022. "You are a claims handler for an insurer specialising in household insurance. One of the policyholders has home insurance, which includes buildings and contents cover. When the insurance policy was incepted the policyholder confirmed the property was their permanent residence. The policyholder notifies you of a claim for water damage to the property and personal possessions. Whilst investigating the claim, you discover the following: The policyholder rents out the property on short-term lets, during which they temporarily vacate the property. However, the policyholder has never informed the insurer of this. The personal possessions are owned by a guest who had rented the property for the weekend. The policyholder has received a criminal conviction for burglary, although this conviction occurred after the inception of the policy. Discuss the effect on both the policy and the claim of the policyholder failing to inform the insurer of the criminal conviction." October 9, 2022. https://academic.tips/question/you-are-a-claims-handler-for-an-insurer-specialising-in-household-insurance-one-of-the-policyholders-has-home-insurance-which-includes-buildings-and-contents-cover-when-the-insurance-policy-was-inc/.

1. Academic.Tips. "You are a claims handler for an insurer specialising in household insurance. One of the policyholders has home insurance, which includes buildings and contents cover. When the insurance policy was incepted the policyholder confirmed the property was their permanent residence. The policyholder notifies you of a claim for water damage to the property and personal possessions. Whilst investigating the claim, you discover the following: The policyholder rents out the property on short-term lets, during which they temporarily vacate the property. However, the policyholder has never informed the insurer of this. The personal possessions are owned by a guest who had rented the property for the weekend. The policyholder has received a criminal conviction for burglary, although this conviction occurred after the inception of the policy. Discuss the effect on both the policy and the claim of the policyholder failing to inform the insurer of the criminal conviction." October 9, 2022. https://academic.tips/question/you-are-a-claims-handler-for-an-insurer-specialising-in-household-insurance-one-of-the-policyholders-has-home-insurance-which-includes-buildings-and-contents-cover-when-the-insurance-policy-was-inc/.


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Academic.Tips. "You are a claims handler for an insurer specialising in household insurance. One of the policyholders has home insurance, which includes buildings and contents cover. When the insurance policy was incepted the policyholder confirmed the property was their permanent residence. The policyholder notifies you of a claim for water damage to the property and personal possessions. Whilst investigating the claim, you discover the following: The policyholder rents out the property on short-term lets, during which they temporarily vacate the property. However, the policyholder has never informed the insurer of this. The personal possessions are owned by a guest who had rented the property for the weekend. The policyholder has received a criminal conviction for burglary, although this conviction occurred after the inception of the policy. Discuss the effect on both the policy and the claim of the policyholder failing to inform the insurer of the criminal conviction." October 9, 2022. https://academic.tips/question/you-are-a-claims-handler-for-an-insurer-specialising-in-household-insurance-one-of-the-policyholders-has-home-insurance-which-includes-buildings-and-contents-cover-when-the-insurance-policy-was-inc/.

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"You are a claims handler for an insurer specialising in household insurance. One of the policyholders has home insurance, which includes buildings and contents cover. When the insurance policy was incepted the policyholder confirmed the property was their permanent residence. The policyholder notifies you of a claim for water damage to the property and personal possessions. Whilst investigating the claim, you discover the following: The policyholder rents out the property on short-term lets, during which they temporarily vacate the property. However, the policyholder has never informed the insurer of this. The personal possessions are owned by a guest who had rented the property for the weekend. The policyholder has received a criminal conviction for burglary, although this conviction occurred after the inception of the policy. Discuss the effect on both the policy and the claim of the policyholder failing to inform the insurer of the criminal conviction." Academic.Tips, 9 Oct. 2022, academic.tips/question/you-are-a-claims-handler-for-an-insurer-specialising-in-household-insurance-one-of-the-policyholders-has-home-insurance-which-includes-buildings-and-contents-cover-when-the-insurance-policy-was-inc/.

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