Insurers do not always pay claims promptly and without question. Indeed, the courts deal on a regular basis with disputes between claimants who have made a claim under their insurance policies and insurers that have refused to pay out under the policies.

One of the most common reasons for the rejection of a claim is that the insured has failed to disclose some material fact which the insurer claims invalidates the cover under the policy.

The problem of persons who have a reasonable belief that they are insured finding, after a loss occurs, that they are not is one of the issues addressed by the new Consumer Insurance (Disclosure and Representations) Act 2012, which has now received Royal Assent and is due to come into effect in 2013.

The Act abolishes the insured’s duty to volunteer information. All that will be required is to answer any question raised by the insurer reasonably and honestly. It will be the responsibility of the insurer to ask for any necessary information.

The insurer will only be able to deny a claim when the insured has made a deliberate or reckless misrepresentation. Where the insured is careless, a ‘proportionate’ test will be applied, based on what the insurer would have done had it been in possession of the full facts.

The Act applies only to individuals taking out insurance for non-business purposes.

In practical terms, the Act will probably mean that insurance cover will take a little longer to obtain in some circumstances, the policy proposals will ask more searching questions and premiums may rise. However, the probability of being drawn into lengthy and expensive litigation over a contested claim should be much reduced.


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