Claimant wins dispute after insurer fails to prove disclosure warning

1 September 2022

A motor vehicle policyholder who had her claim denied by her insurer due to non-disclosure of a licence loss has won her claims dispute.

The complainant lodged a claim on October 9 last year, after the vehicle was damaged, but it was declined.

Auto & General said the claimant breached her duty of disclosure when agreeing to the policy by providing inaccurate information about the other listed driver’s driving history.

The insurer said it would not have offered the policy if it had been aware of the information and reduced the liability for the claim to nil.

The complainant said she misunderstood what the loss of licence question had been asking and did not feel that the insurer correctly informed her of her disclosure requirements because the process was completed online.

The Australian Financial Complaints Authority (AFCA) sided with the complainant, saying Auto & General failed to show it complied with section 22 of the Insurance Contracts Act 1984 (Cth) that mandates insurers clearly inform policyholders of the “nature and effect of the duty of disclosure” before the policy is enacted.

The insurer did not provide the hearing with a copy of the online journey the woman took while incepting her policy and instead showed a screenshot of a statement directed to applicants that mandates a “legal duty under the Insurance Contracts Act” to take “reasonable care” not to misrepresent information.

AFCA said it was not satisfied that the policyholder was shown this statement when she clicked to apply because the insurer did not have a copy of her online journey.

It also questioned the wording of the alleged statement shown, saying the duty to take “reasonable care” only came into effect for general insurance contracts incepted on October 5 last year or after. The complainant had begun her policy on July 1 last year.

AFCA acknowledged that the complainant was provided with a certificate of insurance (COI) that advised her to check that all information was accurate because “it’s an important part of your Duty of Disclosure” but said it was not sufficient enough to prove the insurer completed its obligation to inform the applicant clearly. It also recognised that the information was provided after the policy had begun.

The ruling required Auto and General to reinstate the complainant’s policy and remove the policy cancellation from her insurance record.

AFCA also determined that the policyholder established a valid claim and told the insurer to accept the claim.

Click here for the full ruling.