What is the consequence of a proposer failing to disclose all material facts related to a proposed risk?

When a proposer fails to disclose all material facts related to a proposed risk, the primary consequence is that any claims made may not be honored. This situation arises because insurance operates on the principle of utmost good faith (uberrimae fidei), which requires both the insurer and the insured to disclose all relevant information honestly. If a proposer withholds material facts, the insurer cannot accurately assess the risk involved and may face significant financial exposure if a claim arises that is linked to the undisclosed information. Therefore, when this principle is violated, insurers may have the right to refuse payment for claims, as they were not adequately informed about the risk they were covering.

The other options relate to aspects of risk assessment and premium pricing, but they do not capture the direct and specific consequence of the act of non-disclosure in the event of a claim. Thus, the failure to disclose material facts primarily leads to a situation where insurers may decline payment for claims, upholding the integrity of the underwriting process.