The correct answer is: D. Material facts change.
A life insurer issued a quotation on 10 February, guaranteed for 14 days, which was accepted by the customer on day 10. Consequently the insurer can only decline this risk if the material facts change.
A material fact is a fact that would have influenced the insurer’s decision to offer the policy or the terms of the policy if the insurer had known about it at the time the quotation was issued. If a material fact changes after the quotation is issued, the insurer may be able to decline the risk or change the terms of the policy.
For example, if the customer’s health deteriorates after the quotation is issued, the insurer may be able to decline the risk or increase the premium.
The other options are not correct because they do not involve a change in material facts.
- Option A: The customer submits a second quotation request. This does not involve a change in material facts.
- Option B: The insurer increases its underlying premium rates. This does not involve a change in material facts.
- Option C: The market place experiences a significant downturn. This does not involve a change in material facts.