Duty of Disclosure
When you apply for, renew or change an insurance policy, you have a legal duty to disclose relevant information to the insurer. Understanding this obligation helps protect your coverage and your ability to make a claim.
What is the duty of disclosure?
Under the Insurance Contracts Act 1984 (Cth), before you enter into a contract of insurance, you have a duty to disclose to the insurer every matter that you know — or a reasonable person in your circumstances could be expected to know — is relevant to the insurer’s decision to accept the risk and on what terms.
This duty applies at inception (when a new policy is taken out), at renewal, and when any change is made to an existing policy. It also applies when you are asked to complete a proposal form or declaration.
What do you need to disclose?
You must disclose anything a reasonable person in your circumstances would consider relevant to the insurer. This includes, but is not limited to:
- Previous claims history — the nature, frequency and cost of prior claims
- Previous policy cancellations or non-renewals
- Current or pending legal proceedings relevant to the risk
- Changes in the nature of the risk — new activities, new assets, changes in use or occupancy
- Known defects, hazards or damage to insured property
- Criminal convictions that may be relevant to the risk
- Other insurance covering the same risk
What you do not need to disclose
You do not need to disclose:
- Matters that reduce the risk to the insurer
- Matters that the insurer knows or should know in the ordinary course of their business
- Matters where the insurer has waived the need for disclosure
- Matters covered by a specific question in the proposal that you have answered honestly
What happens if you do not disclose?
If you fail to comply with your duty of disclosure, the insurer may be entitled to:
- Reduce the amount paid on a claim in proportion to what the premium would have been had the matter been disclosed
- Avoid (cancel) the policy from inception — meaning the insurer treats the contract as never having existed
The remedy available to the insurer depends on whether the non-disclosure was fraudulent, intentional, or innocent. Fraudulent non-disclosure carries the most serious consequences.
How we help
As your broker, we assist you in meeting your disclosure obligations by asking relevant questions during the placement process and ensuring the information provided to the insurer is complete and accurate. If you are unsure whether something should be disclosed, disclose it — it is better to provide too much information than too little. Contact us if you are uncertain about any aspect of your disclosure obligations.
Changes during the policy period
Your duty of disclosure applies at inception and renewal, not continuously during the policy period. However, most policies require you to notify the insurer of material changes during the policy period. Failure to notify of a material change (such as a significant change in the nature of the insured risk) can affect your coverage. Contact us if your circumstances change significantly during your policy period.