Insured who failed to disclose debt agreement loses claim dispute

A motorist has lost her claim dispute after she failed to disclose a debt agreement during the renewal of her insurance policy.

The complainant claimed for damage to her car following an accident on March 25 last year. She initially purchased her policy with Hollard Insurance on September 25 2018, and had renewed on September 25 2020.

She had entered a debt agreement under the Bankruptcy Act on January 31 2019 and had not disclosed this to her insurer at renewal.

The insurer declined her claim, citing the failure to disclose the debt agreement, and saying if it had been aware of it, the policy would not have been renewed.

The complainant said that she was not asked a question regarding her debt agreement when she renewed her policy.

The Australian Financial Complaints Authority (AFCA) determined that the insurer had reasonable grounds to deny the claim due to the complainant’s non-disclosure.

AFCA said the insurer “clearly informed the complainant of the general nature and effect of her duty of disclosure on policy renewal”.

“Section 21 of the [Insurance Contracts Act] provides for the insured’s duty to disclose every matter known to the insured that the insured knows to be a matter relevant to the insurer’s decision to accept the risk,” it said.

The complainant said the insurer should have specifically asked her questions regarding her financial position and was unaware of her need to inform the insurer of her debt agreement.

“I acknowledge that the complainant says that the insurer should have specifically asked her about her financial position during phone calls,” AFCA said. “However, the insurer is not required to do this.”

The certificate of insurance dated September 25 2020 had asked the complainant to confirm her previous answer that she was not currently bankrupt or subject to a debt agreement. According to AFCA, there was no information provided by the complainant to indicate a “change in the matter”.

AFCA said that the insurer had proven that it was prejudiced by the non-disclosure and that it would not have renewed her policy had she informed it of her debt agreement.

The insurer was required to refund the complainant’s premium for the policy period that commenced from her renewal if it had not done so.

See the full ruling here.