Did you know that taking out an insurance policy means entering into a legal contract? It’s important to remember both the insurer and insured are lawfully bound to its terms. In Australia, our policies are governed by the Insurance Contracts Act 1984 that sets out the obligations of all parties, but particularly important to the insured is your Duty of Disclosure. “Before the relevant contract of insurance is entered into, every matter that is known to the insured” that would be “relevant to the decision of the insurer whether to accept the risk and on what terms” must be declared. This legislation dictates disclosure both before entering into a new contract, and at renewal time.
There are exceptions in your duty whereby you’re not expected to disclose anything irrelevant to your risk, anything deemed general knowledge or that is reasonable to assume the insurer would already know. Penalties of misrepresentation by way of non-disclosure are different for every insurer and underwriter, but it’s likely your claim could be denied or your policy cancelled. Here are some of the many risks we often see go undisclosed, that can cause issues for the insured/client:
Property Conditions: Asbestos
Asbestos in a property or structure can be an accepted risk by some insurers, and not others. It’s important to notify your broker as soon as the presence of asbestos becomes known. They will be able to explain how to proceed and know where to place your policy.
Property Conditions: Expanded Polystyrene (EPS)
This lightweight cellular plastic material is used in packaging, model planes, surfboards, but most importantly relating to insurance, is used widely in the building and construction industry in cool room and refrigeration in the way of sandwich panelling. It’s classed as highly combustible so unsurprisingly, properties containing insulated EPS sandwich panels are deemed high risk to insurers. If this material is present, make sure it’s also addressed from a fire prevention and risk management perspective. You should also advise the insurer if any properties attached to yours have this material, especially cold storage facilities.
Past History of Claims
It’s no secret that we don’t want a 10-20 year old claim to affect our premiums, but for an insurer to be fully aware of the risk they are taking on, you need to acknowledge recent claims history for at least the past 5 years. If circumstances have changed since a claim and you have put effective risk management solutions in place, you’re more likely to obtain cover.
Statutory History
You might think a statutory charge has nothing to do with insurance, but from a risk perspective, it’s important to an insurer for any type of policy. Answer honestly and fully about circumstances surrounding loss of license, bankruptcy and criminal convictions, or risk denial of claims.
Medical Conditions
It is an expectation of travel and life insurance policies that you disclose pre-existing conditions so that your extent of health risk or possible complications are known. Often in travel insurance, cover won’t extend to medical conditions of which you were aware and diagnosed with prior to the cover being taken. It also may be refused when symptoms of an illness or injury were present at the time of policy inception, but diagnosis wasn’t confirmed.
Non-disclosures will be either innocent or fraudulent. If you have not revealed information regarding your own claims history, charges or medical conditions, these are much more likely to be seen as fraudulent. But remember, these are only a few examples of the many issues and risks relating to duty of disclosure. Avoid the headache and if you’re unsure what should be disclosed, always contact your broker on 08 9349 7900 and divulge any changes in circumstances.