This blog applies to consumer insurance buyers only.
Mistakes are easily made, but when it comes to insurance, they can be detrimental. When taking out car insurance, you will be required to provide prospective insurers with a selection of details. It is important that an insurer is aware of the risks involved with insuring you as these answers will form the basis for their assessment in relation to your eligibility and concessions.
The Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA)’ states that a consumer needs to take reasonable care not to make a misrepresentation when taking out an insurance policy.
Reasonable care:
Reasonable care is a legal duty of the consumer which is considered to set at a standard of the everyday consumer. It is assumed that this person may not know the answer to every question posed by an insurance company. However, it is expected that they would attempt to find the answer.
Misrepresentations:
Misrepresentations occur when people give false, incorrect or misleading answers to their insurers enquires or omit to share information that would affect the insurance policy you were offered. Often people neglect to share correct information regarding their occupation, any modifications to the car, car’s mileage or class of use. Sometimes misrepresentations can be made innocently which is whether the ‘reasonable care’ standard would be considered. This duty extends to renewing, the need to update details or any changes to the policy.
Common issues:
You need to be confident that your insurance will cover you if you make a claim. Often people enter insurance policies using misrepresentations for cheaper premiums and then find that their policy is voided when a claim needs to be made because of this. Other times, people neglect to adequately check the information that they have provided and so fail to detect innocent errors.
There are also regular instances where a broker is used to complete information on a consumer’s behalf, leaving room for mistakes by the broker. In this scenario, whether the insurance can refuse to pay out depends on several circumstances. These include who provided the information, who received the information to check over and confirm, and whether you had the opportunity or made a reasonable enquiry as to check the information.
Consequences:
Your insurance company is within their rights to void your policy and refuse to pay out for your claim where a deliberate or reckless misrepresentation has been made. For example, in 2023 LV= refused to pay out 6% of their claims due to misrepresentation[1].
To void your policy means that it would be treated as though it never existed, meaning you would not be successful in any claim you attempted to make, and any premiums paid would not be returned. Under the road traffic act insurers companies are obligated to pay out any claims made by third parties however most policies if not all include the right to recover funds paid on these third-party claims from you. Where the misrepresentation was careless, the insurers are required to act based on a policy provided on the correct information.
Avoiding these consequences:
To avoid these consequences, you need to ensure that you are checking the information you are providing to insurers is correct and in line with any documentation that you hold and checking the information that they tell you they have received from you. If you use a broker or another person completes your details for you, then you need to check the information that they have sent on your behalf is correct.
[1] LV= gives advisers guidance on cutting misrepresentation and declined claims - Health & Protection
