ISO supports disclosure law

About 10% of complaints to the Insurance & Savings Ombudsman Scheme involve people who have insurance claims declined, or their entire policy “avoided” because they left out information on the insurance application.

“The two most common things people fail to disclose are their pre-existing medical conditions (39%) and any criminal convictions (29%),” Stevens said. “Some cases are clear, where people deliberately leave out information they were asked to provide, knowing that it will go against them. However, in other cases, people accidentally leave out information because they have forgotten, or do not realise it is important.”

The ISO dealt with one case where a health insurance claim for surgery was declined, because when the consumer applied for insurance she had not disclosed she had depression years before.
Although it didn’t relate to her claim, the insurer was still entitled to avoid the entire policy, because the information about depression would have changed the terms on which the policy was issued.

The current law requires a consumer to disclose to an insurer all information a “prudent underwriter” would consider important. “This is extremely difficult for consumers to understand,” Stevens said. “Insurers do tell their customers they need certain information, but my concern is that consumers don’t understand the consequences of not providing the information. That means we have a constant stream of complaints, and some very unhappy people. The ISO Scheme is often in a position where we can’t do anything, because it is the insurer’s legal right to rely on the law and the contract to decline a claim or avoid a policy for material non-disclosure.”