Duty to Take Reasonable Care

The duty to take reasonable care not to make a misrepresentation, which took effect on 5 October 2021 under the Insurance Contracts Act 1984 reforms, fundamentally changed consumer obligations when obtaining insurance. Previously, consumers had a duty of disclosure requiring them to tell insurers about every matter they knew was relevant. Now, consumers must take reasonable care to answer the insurer's questions truthfully and accurately. This shift makes the insurer responsible for asking the right questions rather than expecting consumers to know what might be relevant. What constitutes 'reasonable care' depends on individual circumstances including the type of insurance, the consumer's knowledge, and any assistance provided during the application process. If a consumer doesn't take reasonable care and makes a misrepresentation, the insurer's remedies depend on whether the misrepresentation was fraudulent, reckless, or neither. Non-fraudulent misrepresentations may result in proportionate reductions in claims payments rather than complete denial. This consumer-friendly reform reduces claim disputes arising from inadvertent non-disclosure.