It’s just a little white lie…. But could it mean your claim gets declined?

Recently, we have seen reported an increase in the number of complaints going to the Australian Financial Complaints (AFCA) due to claims being declined on the grounds of “non-disclosure”.  When the worst happens, none of us want to get caught in this position, so we thought we would share of the cases with you.  These cases are from Direct Insurers, however the responsibility remains the same when working with Rivers, as your Broker.

In the first case, Auto & General had put specific questions to their client when they applied online for their motor policy. 

The questions were in relation to the whether the client had been involved in any accidents in the last five years (including not at fault claims) and or had accrued demerit point in the last three years.  All of which were answered “no”.

The client in fact had four motor claims in the last four years and had reached the maximum driving licence demerit points in the last three years and had opted for a good behaviour bond.

Auto & General provided a copy of its underwriting guidelines at the time of the clients application for the policy and also a statutory declaration from its motor underwriting manager to confirm that cover would have been denied had she accurately answered the questions.

The client also claimed they were on various medications that affected her ability to remember but did not provide any medical records to support her defence.

According to AFCA, the information provided showed the insurer had clearly informed the client of their duty of disclosure and, had they complied, the insurer would not have accepted the risk, therefore the compliant was denied.

The second source was in relation to a home and contents policy. In this case, a claim was lodged for the loss of contents due to theft from the home.

Again, when the policy was taken out, the client was asked if they had made any claims in the previous five years and if anyone living in the house had a criminal conviction.

Unfortunately, the client had made at least five insurance claims made between 22 February 2015 and 30 May 2018, which were not disclosed and the clients partner had a significant criminal history and convictions in the previous five years or so before the policy was taken out which again was not disclosed.

AFCA found in favour of the Insurer in this instance as well.

The third example as a very innocent mistake.  A domestic violence victim who inaccurately responded to questions about debt in her online application for car insurance lost a claim dispute.

The woman, who was subject to a part 9 debt agreement under the Bankruptcy Act, said she made an honest mistake and sought that her insurer pay her car accident claim and that her insurance records be expunged.

AFCA denied both requests on the basis she had not accurately disclosed her financial status and her insurer would have declined to offer her cover at the outset had she answered accurately.

The woman said she made the agreement at a traumatic point in her life and did not understand the full consequences. She also did not realise the debt agreement was “part 9”.

AFCA and the insurer both accepted her mistake was “innocent,” but the ombudsman said the consequences of non-disclosure – even if unintended – were “that the insurer is entitled to decline the claim and cancel the policy”.

See the full ruling here

Source References
Determination

Determination