When it comes to insurance, transparency is key for everyone involved. Both the client and the broker have a duty to provide insurers with a fair presentation of risk by disclosing all relevant and material facts. This ensures that insurers can correctly assess the level of risk involved and charge the appropriate premium. But what happens when important information is not disclosed? Let’s dive into the concept of non-disclosure in insurance and its potential consequences.

What is non-disclosure?

Non-disclosure occurs when an individual fails to reveal crucial information that an insurer needs to properly evaluate the risk associated with issuing a policy. This can happen intentionally, where information is deliberately withheld, or unintentionally, where it’s omitted by mistake.

The client’s role is to answer all questions from the broker or insurer truthfully and completely, while the broker has the responsibility to ask the right, relevant questions. Together, they are tasked with ensuring that the insurer is fully informed on everything they need to know. If that doesn’t happen, the ramifications can be severe.

Effects of non-disclosure on insurance claims

Non-disclosure can lead to significant complications when making a claim. Here’s what can happen:

• Claim denial

If an insurer discovers non-disclosure, they may deny the claim outright. This is because the insurer might argue that they wouldn’t have issued the policy, or would have offered different terms, had they known all the necessary information.

• Policy cancellation

The insurer could cancel the policy from its inception, meaning the policy is treated as if it never existed. This is more likely if the non-disclosure was found to be intentional or fraudulent.

• Reduced payout

In some cases, the insurer may still pay the claim but reduce the amount proportionately. This is known as a proportionate remedy and is based on what the insurer would have charged had they been aware of the full details.

• Increased premiums

If non-disclosure is discovered but the policy is not cancelled, the insurer may adjust the premiums to reflect the increased risk. This results in higher payments moving forward.

The long-term impact of non-disclosure

The fallout from non-disclosure can be long-lasting, particularly if your policy is cancelled. A cancellation due to non-disclosure will affect your ability to get coverage in the future, as many insurers take a hard line on policies that have been voided or cancelled due to dishonesty.

Consider this scenario:

Suppose you failed to disclose a DR10 conviction (a driving offence) from three years ago, which might have only added £100 to your policy premium and incurred an increased excess. If you’re involved in an accident resulting in a total loss of your new £150,000 lorry, non-disclosure could mean receiving absolutely nothing from the insurer! That’s a heavy price to pay compared to the small premium increase that could have been applied had the information been disclosed upfront.

How to avoid issues with non-disclosure

Here are some tips to avoid the pitfalls of non-disclosure in insurance:

• Be honest:

Always provide complete and truthful information when applying for a policy or renewing it.

• Review your policy

Ensure that all details in your policy documents are accurate.

• Keep your insurer updated

Notify your broker or insurer of any changes in your circumstances that may affect your policy.

Non-disclosure in insurance can lead to dire consequences, from claim denial to policy cancellation. The best way to protect yourself is to be transparent and honest with your broker and insurer right from the start, and at all times. Paying a little more upfront is far better than facing a cancelled policy and financial hardship further down the line.

If you have any questions, please do not hesitate to contact myself or one of the team.

Lawrence.Fuller@ascendbroking.co.uk | Office: 07719 069 267