The Unsure Consumer – An Insurer’s Dream
It is no great secret that insurers will seek to avoid paying out for a claim through an insurance contract to deny a consumer the monies they should be entitled to through the policy to improve their bottom line. This kind of behaviour probably will not shock many consumers, but the legal hoops that insurers jump through to avoid paying claims may. Therefore, consumers need to be aware of the legalities that exist when applying for an insurance policy to avoid being subjected to any future ramifications.
One of the most significant hoops at an insurers disposal is that of non-disclosure or misrepresentation. As soon as an insurer slaps a consumer with a denial for a claim using this defence, the average consumer seems to accept their fate like a deer in headlights, with the insurer as the car was hurtling towards them. This article will help to dim those headlights and provide the average consumer with some knowledge of how to step out of the insurers’ path when their claim is dismissed based on misrepresentation.
The consumer (the deer)
Previous to the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA), the outdated law in existence placed an unfair burden on the consumer to disclose information to an insurer. This modernised piece of legislation has helped to protect vulnerable consumers from the sneaky techniques of insurers. Still, not many consumers seem to be aware of how the legislation now works in their favour to protect them. It is also worth mentioning that this legislation does only help protect people, unlike commercial entities or contracts that are business-related.
The law (the headlights)
Before CIDRA came to the rescue of consumers, if any incorrect or undisclosed information had been given to the insurer by the consumer, then the insurer could quite easily avoid the policy, meaning no paying out on their part if the consumer brought a claim forward. CIDRA replaced the duty of “utmost good faith” that the consumer had towards the insurer with a much fairer “duty to take reasonable care not to make a misrepresentation”. This means if you are a consumer, you are no longer required to volunteer information to an insurer. The only requirement on the part of a consumer is now to make sure they answer each question posed to them by the insurer as accurately as possible. Proving that an item was not answered accurately is no longer the be-all and end-all for insurers, it is just the starting point in trying to deny a claim; and just like that the headlights are starting to dim in the eyes of the consumer.
The insurer (the car)
Thanks to CIDRA, it is now the duty of the insurer to prove that any misrepresentation made by a consumer was done so without “reasonable care”. Once this has been established the insurer can then seek to rely on the fact that if the consumer had provided the correct information, then they would have written the policy on different terms, potentially with different premiums. Or perhaps have not written the policy at all for the consumer. CIDRA recognises this type of misrepresentation that would have caused the insurer to respond alternately to the terms of the policy as a “qualifying misrepresentation”. The insurer will need to prove that the consumer has acted deliberately or dishonestly in making the misrepresentation to avoid the policy and keep the premiums for themselves. If the insurer fails to prove that the misrepresentation was either deliberate or dishonest but can still show that there was a qualifying misrepresentation, then there are a few avenues of redress available to them. Firstly, the insurer would entirely simply be entitled to a fair remedy, but if they can evidence the fact that if the correct information had been available to them, they would not have written the policy at all, then they can avoid the policy and return the premium. If the insurer can establish, they would have still given a policy to the consumer but on different terms then the policy can be amended to include the change of terms. If the insurers would have charged a higher premium but for the misrepresentation, then they can reduce the claim they payout to the consumer based on this higher premium.
The dimming of the headlights
It is important for consumers of any insurance contract to remember that they no longer a duty of good faith to insurers, but must simply avoid making any misrepresentation when taking out the policy with them. The overarching thing to remember as a consumer nowadays is that the burden is on the insurer to prove a misrepresentation has been made, and whether or not it is a “qualifying misrepresentation”. It is not your job as a consumer to prove that there was not a misrepresentation. If after reading this you still feel like a deer in headlights in relation to having your insurance claim denied, contact us at Indemnity Legal Services to find out how we can assist you.
Written by Natalie Ball.