In Utmost Good Faith, which describes a material misrepresentation?

• A. A false statement that does not affect underwriting decisions
• B. An incorrect statement that involves information used to make underwriting decisions
• C. Concealment of information
• D. A statement that must be true at the time of loss

Answer: (B)

Material misrepresentation is a false statement of a fact that would influence the insurer’s underwriting decisions. In Utmost Good Faith, the applicant must disclose all information that is material to the risk. If a statement is false and it would have affected whether the insurer issues the policy or the terms offered, it qualifies as material misrepresentation. That’s why the description of an incorrect statement involving information used to make underwriting decisions is the best fit.

Concealment—holding back information—also harms the contract but is a different concept from misrepresentation, which centers on a false statement. A requirement that a statement be true at the time of loss doesn’t describe misrepresentation at all; it pertains to different conditions of the contract or the timing of truthfulness.