Non-disclosure

Non-disclosure refers to situations where a policyholder does not inform the insurer of relevant information that could affect the insurer's decision to provide coverage or the terms offered. Under the current duty to take reasonable care (for consumer insurance from October 2021), non-disclosure occurs when a consumer doesn't answer the insurer's questions truthfully and accurately. The consequences depend on whether the failure was innocent, reckless, or fraudulent. For innocent non-disclosure where the consumer took reasonable care but made an honest mistake, the insurer may reduce claim payments proportionately to reflect what premium would have been charged with correct information. For reckless non-disclosure, the insurer can void the policy from inception. Fraudulent non-disclosure allows the insurer to void the policy and potentially refer the matter to police. It's important to note that under current law, the insurer must prove the consumer didn't take reasonable care - they can't simply deny claims because information wasn't volunteered. Insurers must ask clear, specific questions to establish what information they require.