car-insurance-claimsWe have given much attention on the car insurance blog to finding cheaper car insurance and identifying the best car insurance company. We have focused on the need to be careful when reading the policy document and to note the fine print.

We would however also like to focus on a small but important part of the process of gaining car insurance – the disclosures made by the insured client on the policy application!

Neglecting to make a full disclosure in your policy documents may lead to an invalid claim – and will allow the insurer to decline your claim. This is very important to understand – so let us explain this in more detail:

  • A car insurer calculates the premium based on all the information that the client has provided.
  • This information will reveal the risks or likelihood of vehicle damage or vehicle loss.
  • Much of this information is only known by the client – such as previous accidents and claims or convictions for drunk driving etc
  • Only the client is aware who the nominated drivers or regular drivers will be, whether the vehicle is to be used for private or business purposes etc.
  • By not providing ALL this information – and the CORRECT information – you will be guilty of defrauding the insurer and placing the insurer in an unfair, perilous position!

It is important to understand that this is not a “back door” for the insurer to dismiss an insurance claim – but rather as recognition of a fundamental principle of insurance! It is only fair that the rights of the insurer and the legitimate expectation of full disclosure are respected as well.

What is the measurement of how much is to be disclosed?

Insurers are entitled to full and frank disclosure of all facts material to its assessment of the risk and the premium charged. The Ombudsman for Short-Term Insurance, Brian Martin says if you are unsure of your facts, rather ask for more time from your insurer to verify the facts or advise them that you are unsure.

Car insurance clients will ask themselves “Do I need to inform the insurer about this?” We would like to advise that the client rather attempts to place himself in the position of a fictitious judge and ask – Would an independent judge regard that the insurer should have known about this when calculating the premium?”

When does the client have to make this full disclosure?

It is important to recognize that this is not a once-off disclosure or the purchase of a once –off asset! The agreement is based on continuous cover for an asset that needs to be protected from ever changing threats. If those threats are significantly altered – the car insurer needs to be made aware of this!

Consumers need to ensure that they advise their insurer or broker if circumstances have changed since the inception of the policy, for example, there is a new regular or nominated driver, the purpose of use has changed or you have had a change of address.

Decisions by the Ombudsman for Short Term Insurance

It is perhaps best to also to focus on the decisions of the Ombud pertaining to disclosures! How will the Ombud adjudicate disputes about the correctness of information disclosed?

An insurer relies upon the information furnished and bases its assessment on the truth and accuracy of that information. “If you have had prior claims or a judgement against you, make sure that you disclose this information. Rather adopt the policy of providing too much information then too little information”, says the Ombudsman for Short Term Insurance.

Example of partial disclosure made to a car insurer

The Office of the Ombudsman for Short Term Insurer dealt with a complaint where the insured had telephoned an insurance company enquiring about insurance cover for his vehicle and contents of his house. Based upon the responses given to a number of questions, the insurer provided a quotation which was accepted by the insured.

A few months later the insured filed a claim for damage to his motor vehicle which had been involved in an accident in a parking garage. The insurer rejected liability for the insured’s claim on the grounds of non-disclosure. The insured had submitted four accident claims against his previous insurer within a short period of time and which were of significant value. At the time that the insured took out the cover, he was asked whether in the previous five years there had been claims made against his vehicle, to which he only acknowledged one claim. Had the insured provided proper disclosure to his insurer, they would have declined the risk due to his history of claims.

The Ombud commented as follows:

“In this instance, we agreed with the insurer’s decision that they would declare the policy void from inception, but that they needed to refund all the insurance premiums that had been paid by the insured.

The insured knew that he had filed a significant number of claims within a short period of time against his previous insurer and that this information would certainly have affected the insurers assessment of the risk.”

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