Deliberate non disclosure of risk is fraud and will see claims rejected
People should not try to cut insurance costs by deliberately withholding information from their insurers.
Failure to disclose important information that directly affects insured risk is a violation of the policy agreement and can result in claims being rejected by your insurer, worsening your financial position. Since it is also fraud “it could even result in criminal prosecution” says Gari Dombo, Managing Director, Alexander Forbes Insurance.
Insurers work on the basis of disclosure of material information. Material information, says Dombo, is “any information that a reasonable person would have considered relevant to a clients’ risk profile, the non-disclosure of which would materially alter the terms and conditions of the contract.”
And it doesn’t matter how many years clients might have been paying their monthly premiums. Failure to disclose important information to your insurer could see claims rejected in the event of loss or accident.
Insurers rely on the information that clients supply to accurately assess the risk that each client faces. This is why clients are obliged to advise their insurance providers of any changes that may affect their risk profile. Insurers use this information to assemble the most suitable cover for their clients’ lifestyles. As such, any changes that improve a clients’ risk profile should also be passed on to the insurers as this may even result in lower premiums.
Moreover, the duty of disclosure is a continuous duty on the part of the client. “Whenever there is a material change in the client’s risk the insurer must be informed so that they can assess whether the risk is still acceptable to them and, if so, at what terms and conditions” advises Dombo.
For example, if your vehicle is insured for social and private use only and you have an accident while transporting your client’s merchandise, your policy may not be able to respond and you would be held personally liable for the damages. All because you had failed to inform your insurer that you use your car for business purposes.
Similarly, “if you change your address insurers would want to have the opportunity to assess any new exposure and re-visit terms and conditions should this be necessary,” adds Dombo.
Another common cause of claims rejection is “clients failing to inform their insurers that they are making alterations to their homes” says Dombo. For example, if you fail to inform your insurer that you have added a lapa or a thatched roof and it catches fire, you may end up homeless with serious financial problems – and no insurance payout.
To be on the safe side, always fully disclose and inform your insurer whenever you make a change that could increase your risk profile. “If you are not sure whether something might affect your risk profile, play it safe and discuss the change with your insurer or broker anyway. Give the insurer the opportunity to either decline the risk, re-rate, impose different terms , excesses etc” concludes Dombo.
ENDS
