Income protection insurance (IPI) policy is for insuring the ill or disable worker’s monthly income – in case of their unavailability on work due to illness or disability.
Mr. Farid v Prudent Insurance Inc. case questions
Explain how information asymmetry may lead to adverse selection. Illustrate your answer using the dealings between Mr. Farid and Prudent Insurance Inc. After reading the case, it has been revealed that Mr. Farid had misled the Prudent Insurance Inc.According to the case, in his application for insurance policy – he mentioned that his duties do not involve the “Manual or outdoor duties.” Nevertheless, in spite of his prior acceptation that he do not have any outdoor job activity. He, in his insurance claim form has responded to the question about physical requirement of his work that his day activities contain almost ninety five percent of outdoor and manual duties.
Firstly, in application form Mr. Farid denied the outdoor and manual activities in his job. Then, in expiation for insurance claim Mr. Farid explained that his day activities contain almost ninety five percent of outdoor and manual duties. Thus, it is clear that the contradiction in the application form and explanation for insurance claim has voided the insurance policy.
If you were the underwriter, would you approve Mr. Farid’s application for income protection insurance? Explain I or anyone on the job has to evaluate the case on merit as well as according to the rules and regulation. In case of Mr. Farid’s, for me it is hard to approve it. The reason is rules are superior to anything and Mr. Farid’s case is going to overrule.
Should Prudent Insurance Inc. pay the claim or deny it? Explain
Prudent Insurance should deny the claim due to the contradiction between the basic information and information provided in claim form. Legally, it voids the insurance contract between Mr. Farid and Prudent Insurance Inc. Household items insurance or household contents insurances belong to the category of insurance which insure the personal belongings of insured (Advice guide, n.d).
Mr. Green V Sun Insurance Inc. case questions
How would the information about Mr. Green’s earlier convictions affect the insurer’s underwriting decision on Mr. Green’s application? After reading the whole case, it is more complex than the straightforward case. On the one hand, Mr. Green’s policy suggests that he is entitled to avail the claim. And, on the other hand, Sun Insurance Inc’s inquiry claims that Mr. Green does not entitled to avail the claim due to in complete compliance to the insurance company by not providing the complete information about earlier convictions.
At the same time, Green’s claim of providing all the information to the broker on the time of application has made the situation more complex. Due to critical condition of the case, now it is better for both parties to settle the disputes out of court by appointing an adjustor.
If you were appointed as an independent adjustor, what would be a fair solution for the dispute between Mr. Green and the insurer? (Hint: Examine (a) information withheld in relation to adverse selection, (b) industry practice regarding incomplete client forms
In my opinion it is client’s duty to completely fill and or check the form. Moreover, receiving the attested copy of filed documents is the standard procedure for filing the documents for any purpose. I as an adjustor will apply the “industry practice regarding incomplete client forms.” Because, Mr. Green’s statement that he told about the convictions to the broker only entail the ambiguity. And, ambiguous cases possess more chances to be rejected. Thus, if I was appointed as an independent adjustor, I will definitely reject Green’s claim on ground of industry practice regarding incomplete client forms.