Topics: Insurance, Risk, Risk management Pages: 20 (2023 words) Published: May 9, 2015

the fear of the Lord is the beginning of wisdom

What are proposal forms?
 A proposal form is a standard mass-prepared document by insures to the insured for the purpose of disclosing the needed material facts, it is usually the form of questions that aim the insured to provide answers.  It is the most common mechanism by which the insurer receives information about risks to be insured.  Proposal form stands as an offer to the insurer of which the insurer is at liberty to accept or reject.  If a proposal is properly presented, and an insurer accepts it, and the premium is paid (or there is an agreement to pay the premium) a contract comes into existence.

 Generally a proposal form is used in cases involving simple risks and are not required in cases of large industrial risks.
 In such cases inspection of the risk is essentially undertaken before accepting the proposal.  In the past the proposal form acted as a form of advertising and there is still an element of this today.  In most classes of insurance a proposal form is completed by the proposer and submitted to the insurer to give the insurance company full particulars of the risk against which the insurance protection is desired  It is the basis of any insurance policy.

 Proposal forms will be of variable length dependent on the nature of the risk and the information which an insurer will need to be able to underwrite the risk.

For example private car form has quite a number of questions but the liability form is perhaps even longer.

the fear of the Lord is the beginning of wisdom

What are proposal forms?

Proposal forms should be simple to understand and easy to complete.

There are certain classes of insurance for which proposal forms are not normally required.

The main example of this being fire and marine insurance.

In the case of a fire insurance the actual details of the risk could be so complex that it would be impossible to confine them to the proposal form.

In such cases the insurers will often use their own risk surveyors to visit premises or to discuss risks with proposers.

Brokers play an important part in this process, the broker prepares full details of a risk for an insurer, in a form which can be used by the insurer

This saves both the insurer and the proposer a great deal of time.

the fear of the Lord is the beginning of wisdom

Why do insurance companies need
proposal forms?

The insurance proposal form forms the basis of the contract between the insured and the insurer.

It is also the means by which the statistical information is collected by the insurer about the proposer

In almost all proposal forms, there are questions requiring information about the insurance history of the proposer in the branch of insurance where he is seeking cover.

This record is established of any claims made, any loses sustained any cancelation of previous insurance and any refusal to effect a renewal of an existing insurance policy or any rejection of an insurer of a proposal of insurance.

It is the form that the underwriter uses (evaluates the risk) in deciding whether to accept or reject the proposer’s offer.

It is also the form that they will return to in the event that there is a loss or claim to check that there is no difference in information provided at start.

the fear of the Lord is the beginning of wisdom

Contents of a typical proposal form
 There are general questions and specific questions
 All are of value to the insurer
 The specific questions “risk specific” –these are questions that are related to the form of risk for which cover is being sought.
 They are the questions which will assist the underwriter in determining whether or not to accept the risk and on what terms and price.
 In the private car form they would include, for...
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