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The changes to the
Duty of Disclosure on or after the 28th December 2015
There have been a
number of substantive changes surrounding the duty of disclosure. The
changes are extensive, so this is just a brief summary:
What does this mean for you?
According to the
Government, the intention of this reform is to ‘…permit insurers to
continue to rely on the accuracy, as at the time of inception or the
previous renewal, of matters disclosed on inception and previous
renewals’.The duty of disclosure will differ slightly depending on the
type of insurance your apply for. For ‘eligible’ contracts of insurance the insurer is
required to ask specific questions of the insured which are relevant to
underwriting the risk. Policies renewed or varied by the insurer on or
after 28 December 2015 are also subject to the ‘specific questions’
requirement or the insurer must supply a copy of the answers to questions
originally supplied to them by the insured and ask the insured to
disclose any changes.
’Eligible’ contracts of insurance are the following classes of insurance, but only
when they are provided to an individual:
- motor vehicle
and motorcycle
- home building
and contents
- residential strata
- travel
- personal
accident and sickness
- consumer credit
products
When taking
out a new policy considered an ’Eligible’ contract of insurance: Answer the specific questions on the application form truthfully
and accurately. You must tell the insurer all information that’s known to
you and that a reasonable person would be expected to provide in answer
to the questions. You don’t need to provide information that isn’t
relevant to the questions in the form.
When
renewing a policy considered an ’Eligible’ contract of insurance: Answer the specific questions asked by the insurer or review the
information you previously provided (the insurer will provide a copy of
this). Tell the insurer about any changes (or tell your broker, so they
can tell the insurer). If nothing has changed, simply tell the insurer
that. There’s no need to provide any other information.
For all
other policies, an insured has a duty to disclose matters the insured
knows to be relevant to the insurer’s decision to accept the risk or that
a reasonable person could be expected to know to be relevant to the
insurer bearing in mind the nature and extent of the insurance cover to
be provided under the relevant insurance policy and the types of people
who ordinarily apply for this type of insurance. It doesn’t extend to
matters:
- That diminish
the risk;
- That are of
common knowledge;
- That the
insurer knows or in the ordinary course of the insurer’s business
ought to know;
- As to which
compliance with the duty of disclosure is waived by the insurer.
The duty
is also ongoing between the date of application for insurance and the
commencement of the policy. The insurer must notify the insured of the
nature and effect of the duty of disclosure in the application for
insurance, the renewal terms and the policy wording. On after 28 December 2015, if that period is greater than 2 months, the
insurer must give a reminder notice to the insured of the ongoing duty.
When
renewing or taking out a new policy – all other policies: (i.e. not
considered an ‘eligible contract’.)
You must tell the insurer:
- all information that is known to you which is relevant to
the insurer’s decision whether to insure you (and the terms on which
to insure you); and
- everything that a reasonable person could be expected to
know is relevant to the insurer’s decision, having regard to the
nature and extent of the insurance cover to be provided and the
class of people who ordinarily apply for the insurance.
Most
insurance products are underwritten by the insurer before accepting the application
for insurance. The insurer considers and, in some cases, makes enquiries
into the subject of the insurance. This is usually done in the proposal
or application for insurance but also occurs at renewal or when an
endorsement or variation to the contract of insurance is given.
If the non-disclosure is fraudulent, the
insurer can cancel the policy and refuse to pay any claim. If it is
“innocent” then the insurer may reduce the amount of any claim to the
amount that would have been paid had the disclosure been made.
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