REPRESENTATION :
All disclosures relating to an insurance policy must be made at the time of entering into the insurance contract. The insurance company hands over the application proforma to the person buying insurance seeking complete details. The person has to mention his profession, income, age, family, history of family, general health, ailments suffered, medical reports, matters relating to conduct and character, any criminal record, etc.
Similarly in case of general insurance while insuring an asset all facts regarding the condition, frequency of usage, wear and tear that may have occurred have to be disclosed by the buyer. These details given by the proposer known as representations demand correct and full disclosure by the buyer of insurance. Though it may not be possible in the proforma to ask all the required questions since the details vary from person to person, the insurance company determines the materiality of the given facts by exercising due diligence through proper scrutiny.
It is also open to an insurer to seek clarification regarding gaps in information to be furnished. If required, further enquiry is made. This is important, because based on this, the severity of risk is assessed and the amount of premium to be charged can be determined.
The application also mentions the stipulations and conditions which when fulfilled obligate the insurance company to fulfill its promises. It has to be noted that it is the duty of the insurer to inform and explain the insured about the working of those stipulations and broadly set the conditions in which the insurer may be relieved of such obligations to give the insured an idea about the performance of the contract. This helps in dispelling any misunderstanding or ignorance. Of course certain information, which is normally assumed to be of common knowledge to everyone, need not be disclosed. Thus while buying insurance for an electric generator in India it is not necessary to mention that power failure is common in India and that the gadget will be used more often. Also when a person buys a second policy from the same insurer it is presumed that the insurer will check for the relevant facts about him by referring to the first policy and without seeking explanation all over again. Information related to following matters need not be disclosed:
1. Facts related to law
2. Facts of common knowledge to all
3. Facts which can reasonably be discovered by the insurer
4. Facts which could have been revealed by a survey
5. Facts which have been covered by policy conditions
6. Facts which reduce the risk