Not telling the truth on insurance application forms is called non-disclosure of a material fact. Current insurance disclosure law dates back to the Marine Insurance Act 1906 and many in the industry see this as being outdated and inappropriate.
New proposals by the Law Commission would hopefully see an amendment to these and if accepted by the government would see insurance companies face a five-year limit on their ability to decline a claim for non-disclosure of a material fact.
The duty of disclosure could be confusing as policyholders may not realise that they have a duty to disclose information that they have not been asked for and their for in some situations claims maybe denied, even when the policy holder has acted honestly and reasonably.
These new proposals are intended to still be harsh on fraudsters and to provide protection for those who acted reasonably.
Our view
We suggest Insurers will object to a change in the law such as this and there may be intense lobbying. We suggest that premiums will rise should such a five year non-contestability period come into being. The reality is that people need to be genuine in the completion of an application for insurance.
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