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Couple caught out by non-disclosure on renewal

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A couple who say they made an “honest mistake” by not updating information when their car insurance policy renewed have lost a claim dispute.

The pair arranged the policy with Hollard in December 2016 and told the insurer that neither of them had had their licence suspended in the last three years.

But the man later did have his licence suspended, on October 9 2019, and when the policy last renewed two months later he did not disclose the suspension.

A claim was lodged in November last year but the insurer denied it on the basis of non-disclosure.

The couple took their case to the Australian Financial Complaints Authority (AFCA) with the man arguing that it was an honest mistake and the policy renewed automatically, without him actively making a misrepresentation.

But AFCA found that “this does not relieve him of his duty of disclosure”.

“Under the [Insurance Contracts] Act, an insured may breach the duty of disclosure even if they have no fraudulent intent,” the determination said.

The renewal notice included a copy of information previously disclosed and asked the complainants to tell the insurer about any change, AFCA said.

“Under section 21B(10) of the Act, he is taken to have informed the insurer that his licence had not been suspended,” the AFCA ombudsman said.

“I am satisfied that the complainants knew about the suspension, and knew (or should have known) that it was relevant to the insurer’s decision to offer insurance.

“I am satisfied that, by failing to disclose the suspension, the complainants breached the duty of disclosure.”

Hollard was able to show that had the licence suspension been disclosed, it would not have offered to renew the policy. Therefore it was entitled to reduce its liability to nil.

Financial Rights Legal Centre Policy and Advocacy Officer Drew Macrae told that non-disclosure on renewal is a common problem for consumers.

“People rarely read their documents and this is the problem with automatic renewals,” he said.

“People are getting tripped up all the time, as there is a set and forget culture.”

Mr Macrae argues that insurers could use some level of automation in checking for licence issues such as suspensions.

“In the UK you can enter your licence number and it is used to update any information that insurers require.”

Insureds could then be alerted to any problems and seek alternative cover, he says. Alternatively, insurers could force customers to go through a similar process at renewal to that at inception.

“They have the technology to do that and you are actually buying a new product,” he said.

Click here to read the AFCA ruling.