Ensuring Fairness in Insurance: A Case Study

At Momenta Advisors, we believe in insurance that works harder for you, providing the momentum your business needs to thrive. Today, we delve into a recent case to illustrate how fairness is central to the insurance process.

Complaint Overview:
A complainant filed a claim for the theft of their insured vehicle, only to have it declined by the insurer. The insurer cited a misrepresentation regarding the complainant’s criminal history at the inception of the policy as grounds for denial. Despite the complainant’s insistence on a genuine mistake, the insurer stood firm in their decision.

Key Findings:
The insurer was within its rights to deny the claim and cancel the policy, as the complainant had failed to disclose a criminal conviction when prompted during policy inception. This failure constituted a breach of the duty to take reasonable care not to make a misrepresentation, as outlined in the Insurance Contracts Act 1984.

Reasons for Determination:
The insurer bore the burden of proof to establish the misrepresentation, the failure to take reasonable care, and the resultant prejudice. The complainant’s failure to disclose a criminal conviction constituted a misrepresentation, despite claims of misunderstanding. The insurer demonstrated that had the correct information been disclosed, the policy would not have been offered, justifying the denial of the claim.

Fairness in Action:
The outcome, while unfortunate for the complainant, underscores the importance of transparency in insurance contracts. It would not be fair to compel the insurer to honor a claim based on misrepresented information. The insurer’s ability to reduce liability aligns with the principle of restoring parties to their pre-contractual positions.

Supporting Information:
AFCA’s approach emphasizes fairness, considering legal principles, industry standards, and available information. The case underscores the significance of accurate disclosures during policy inception, as mandated by relevant legislation.

In the realm of insurance, fairness is paramount. While the denial of a claim may seem harsh, it ensures integrity within the insurance system. At Momenta Advisors, we stand by principles of transparency and accountability, helping you find momentum in your business while ensuring compliance and fairness in insurance dealings.

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