Insurance companies have a right to accept or decline insurance proposals and this decision is made based on information supplied by the applicant on the proposal form. Consumers must be aware that they have a duty to the insurance company to disclose all information which might affect the risk being insured. In terms of the Short Term Insurance Act all information needs to be disclosed that a reasonable person would regard as material for the insurer to properly underwrite the risk. Rather disclose too much, including irrelevant information than risk not disclosing enough information.
It is essential that accurate answers be given at the time of proposal and information furnished regarding your financial status including judgements taken against you and adverse credit postings. Any misrepresentations by the insured will be grounds to repudiate a claim against your policy.
In other words the insurer needs to have a thorough understanding of the individual applying for insurance and the circumstances that could affect the risk. The insured also has a duty to notify the insurance company when a change in circumstances occurs, such as a change in their residential address, or a change in the identity of the regular driver of the vehicle. The duty of disclosure falls squarely on the shoulders of the insured
Many complaints to the Ombudsman’s Office emanate from non-disclosure where the insured has not notified the insurer of changes.
When repudiating a claim on the grounds of non-disclosure or misrepresentation the insurer argues that had the correct information been furnished, it would not have accepted the risk proposed for, or only on substantially different terms. Nothing is more frustrating for an Insured who genuinely believes he has a valid claim under the Policy, than to be advised that the claim has been repudiated by the Insurance Company.
Consumers need to be proactive in advising their insurer of any changes in their circumstances to avoid possible problems or possible cancellation of their policy. To protect the consumer it is recommended that all disclosures be made in writing and a copy kept of the communication. However this is not always possible as some insurers conduct all their business by phone and record these calls. If this is the case it is advisable that a note be made on the policy of the time and date of the call, who at the company was spoken to, and what change was affected, when making a changes to a policy.
It is standard practice for an insurer to send an updated schedule or endorsement of the policy to the insured once the changes have been made. If consumers make use of an insurance broker they should make sure that they receive an acknowledgement of their request from them in writing.