To make an informal assessment of the risk and calculate the appropriate premium, your insurer needs information about the risk you are seeking to insure.
For this reason, before you enter into a contract of insurance, you have a duty under the Insurance Contracts Act 1984 to disclose to your insurer every matter that you know, or could reasonably be expected to know, is relevant to the insurer’s decision whether to accept the risk and, if so, on what terms. The duty also applies when you renew, extend, vary, or reinstate a contract of insurance.
You do not have to disclose anything that:
- Reduces the risk to be undertaken by the insurer;
- Is of common knowledge;
- Your insurer knows, or in the ordinary course of its business, ought to know; or
- If the insurer has waived your obligations to disclose.
If you do not comply with your duty of disclosure, your insurer may be entitled to reduce its liability in respect of a claim or may cancel your contract of insurance. If the non-disclosure was fraudulent, the insurer may be able to avoid (or cancel) the contract of insurance from its beginning. This would have the effect that you were never insured.
One important issue to be disclosed is the history of losses suffered by the person seeking insurance or any closely associated person or entity. As you are responsible for checking that you have made complete disclosure, we suggest that you keep an up-to-date record of all such losses and claims.
If you have any questions about whether information needs to be disclosed to your insurer, do contact us.