5. Discuss the following: Duty of Disclosure & Good Faith Insurance contracts are contracts uberrimae fidei — contracts of the utmost good faith. This means that both parties (especially the insured) are legally obliged to act honestly and disclose all material facts relevant to the risk. What is required:   The insured must disclose all facts that are material to the insurer’s assessment of the risk, even if not specifically asked. A material fact is one that would influence a reasonable insurer’s decision to accept or reject the risk, or determine the premium or terms. Examples:   A person applying for life insurance must disclose serious health conditions. A property owner must disclose known fire hazards when insuring a building. Effect of Misrepresentation A misrepresentation occurs when the insured:   Fails to disclose a material fact (non-disclosure), or Provides false or misleading information. Legal Consequences:    If the misrepresentation was material, the insurer may: - Repudiate (cancel) the policy; - Reject a claim, or - Avoid liability from the beginning (ab initio). The consequences depend on whether the misrepresentation was: - Fraudulent (intentional), - Negligent, or - Innocent (accidental). The insurer must prove the misrepresentation was material and that it influenced their decision to insure. Warranties in Insurance Contracts A warranty in an insurance context is a term or condition of the contract that must be strictly complied with. Nature of Warranties:   They are express or implied promises made by the insured. If breached, the insurer may be released from liability, even if the breach had no connection to the loss. Types of Warranties: Affirmative warranty Promissory warranty Express warranty Implied warranty A statement that a certain fact is true at the time of the contract A promise that a certain action or condition will be maintained in the future Clearly stated in the policy document Not expressly stated, but legally assumed Legislative Impact on Warranties Modern South African law, especially under the Policyholder Protection Rules (PPRs) and regulatory frameworks such as the Insurance Act 18 of 2017, has placed limitations on the strict enforcement of warranties. Effects of Legislation:    Section 53 of the Long-term Insurance Act (still referenced in transition) and related rules provide that: - An insurer may not reject a claim based solely on a technical breach of a warranty unless the breach is material and relevant to the loss. The Policyholder Protection Rules (PPRs) require: - Clear, understandable policy language, - Fair treatment of policyholders, - That insurers cannot avoid liability on the basis of non-material misstatements. The goal is to protect consumers from losing cover unfairly due to minor or irrelevant breaches.