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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part I)

Anita proposes a health policy but does not disclose that she has had a prior cardiac procedure. The underwriter relies on the proposal form to assess the risk. Which underwriting principle is most directly breached by her non-disclosure?

The principle breached is utmost good faith. Underwriters rely on the proposer to disclose all material facts, such as a prior cardiac procedure, because they affect risk acceptance and pricing. Indemnity, subrogation and contribution deal with claims and recoveries after a loss.

  1. AIndemnity
  2. BUtmost good faithCorrect
  3. CSubrogation
  4. DContribution

Explanation

The underwriter depends on the proposer to reveal material facts, since the proposer knows them best. Failing to disclose a prior cardiac procedure breaches utmost good faith. Indemnity, subrogation and contribution concern compensation and recovery after loss, not disclosure at proposal.

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