Duty of disclosure: What do you need to tell your car insurance provider?

Insurance is all about risk. When taking out car insurance, your risk as a customer is assessed based on factors including the kind of car you drive, your driving record, insurance claims history, and a number of statistical demographic details.

While every provider may have slightly different requirements for what you need to tell them, it’s this disclosure of information which enables policy conditions and premiums to be set. 

When you sign an insurance contract or renew it, you’re giving your word in a legal sense that the details you’ve provided are true and accurate. When you make an insurance claim, the provider will go through this information to ensure you’ve met your duty of disclosure, and thus the conditions of the original agreement, before deciding whether or not to accept the claim.

But according to consumer advocacy group Financial Rights Legal Centre, this is a flawed system. In their October 2021 report, the group argues that governments and the insurance industry should work together to automate insurance disclosures when it comes to a person’s driving and insurance claims records.

They say this is necessary as many people may not understand questions asked or conditions outlined in insurance documents, and may inadvertently supply incorrect information which can result in rejected claims. The same goes for simply forgetting or misplacing records on key details.

The Financial Rights’ analysis found car insurance claims were the most common disputes regarding non-disclosure addressed by the Australian Financial Complaints Authority (AFCA), with three-quarters involving non-disclosure of driving, criminal or insurance history. 

Of the cases ruled on by AFCA, around 80% were in favour of the insurance providers.

A recent Royal Commission recommendation to replace ‘disclosure’ with a requirement to take ‘reasonable care not to misrepresent’ has been implemented by the government to address these issues. 

However, the Financial Rights Legal Centre says this still allows for errors, and that automated data pre-filling would be a better solution. The report notes similar systems already exist, pointing to companies accessing driver demerit point information via the Service NSW online portal when issuing Compulsory Third Party (CTP) car insurance in NSW.

Through an external survey, the group found the majority of Australians would be comfortable sharing their driving records (71%) and insurance history (73%) via an automated data system.

Why are some car insurance claims rejected?

As outlined above, some insurance claims may be rejected because you misrepresented yourself as a driver when purchasing or renewing a policy, with this voiding your cover. 

Other car insurance claims may be denied because the event that caused the damages you're claiming for isn’t listed as ‘insurable’ on your policy. Similarly, your claim could be refused if you were engaged in other activity that voids your cover during an incident. 

This can include a range of specific events and actions, from driving while under the influence of alcohol or drugs to letting another driver behind the wheel if they are in a category specifically not covered by your insurance (such as a young driver or L-plater). For a reminder on the basics, here are a few things commonly not covered by comprehensive car insurance. 

What can I do if my car insurance claim is refused?

If your car insurance claim is rejected, start by contacting your insurance company’s complaints or internal dispute resolution department. If you can resolve the issues that led to your claim being refused internally, this may save you time and hassle.

If this route doesn’t get you anywhere and you still believe you’re entitled to an insurance payout, you can lodge the complaint with AFCA. This is a free and independent service that results in a binding determination, meaning your insurance company will have to abide by the AFCA’s ruling and pay the claim if it’s deemed valid. 

If this avenue also doesn’t result in the verdict you’re after, you can take your insurance company to court over the claim. Just bear in mind this will come with legal costs, so may only be worth considering for considerably larger claims worth the money and effort.

If you aren’t happy with how your insurance company handled your claim or other policy details, you may want to consider switching car insurance. Start by comparing features of the comprehensive car insurance options below.