By John Grant Many people paying insurance premiums run the risk of having no cover. Under current law insurers have broad opportunities to deny a claim, and this is contary to the commonly held view that it's the insured who to determines what is relevant when it comes to disclosure. This is not the case. At present insurers have broad powers to deny claims for non-disclosure. While the law covering disclosure is under review and may change, it hasn't yet - and these reviews can take a long time. In the meantime, be warned. Insurers can deny your later claim if you did not disclose information when you first knew it, and that information would have meant they would not have offered you insurance back then, or renewed your policy. It is not your decision regarding what is required to be disclosed. To help understand this issue here are a two examples:
- A person insured a house who has in the past 12 months been convicted of cultivating marijuana. They were convicted in the District Court and fined $700 plus costs. The insurance had been with the same company for several years and had been renewed after the conviction. After the renewal the house suffered significant damage from a kitchen fire. The insurer has the right to deny the claim because of the failure to disclose the conviction when the policy was renewed. The insurer can currently argue that had they known of the conviction at renewal, they would have withdrawn the offer to renew the policy.
- A customer of an car insurer is in financial trouble. They have been made redundant, are now out of work, and have fallen behind in the payments on their car. But this is not disclosed at renewal, and shortly after the car is stolen. The insurer would need to be able to establish that it is their normal practice to deny insurance for people who are in arrears. Never-the-less, if the claim has suspicious circumstances then the non-disclosure of financial pressure can become grounds to deny the claim or adjust the loss.
The ramifications of this are wide and in an article published last year in the Sunday Star Times , Insurance Ombudsman at that time, Karen Stevens, is quoted as saying "The law is scary and the consequences are really scary. I don't know if consumers are being sufficiently scared up front to understand exactly what's likely to happen if they fail to disclose." Under review The Government is trying to find ways to tone down this "broad approach" to disclosure and we can expect to see changes when legislation is introduced later this year. In the meantime the message is clear. You must disclose anything and everything to your insurer. The ramifications of failing to do this can be very significant. You are better to ask and have a record of doing so than find an insurer sees more than you do in the misdemeanors of your past.