The current situation – Duty of full disclosure
Duty is on you to disclose anything that may affect the insurance company’s decision to cover you.
When you apply for insurance you are asked declaration questions by the insurance company. You are expected to answer these to the best of your knowledge.
With current legislation, a final question is then asked to “disclose any information that may be relevant to the insurer’s decision to insure you”. This is a catch all question which does not relate to any specific question asked by the insurer.
Relevant information is deemed as anything that can affect the decision to insure the risk, and for what premium and excess.
The current full disclosure approach has drawn criticism for expecting too much from you. It’s very difficult for you to know everything that might change the premium or excess of your insurance policy.
The future – Duty to take reasonable care
Duty is on the insurance company to ask questions that help their decision to cover you. Your duty is simply to take reasonable care and not misrepresent this information when answering them.
There is currently an Insurance Contract Law Review taking place in New Zealand. Proposals for the government’s Options Paper want to change the requirements around disclosure. More responsibility is being placed on insurers to get information, instead of asking you to declare anything they might think is relevant.
You will likely see a shift from a ‘Duty of Full Disclosure’, to a ‘Duty to Take Reasonable Care’, and to not make a misrepresentation.
What this means for you
When you apply for cover the insurance company will ask more specific questions. You will no longer be asked the catch-all question to declare any other information that might be relevant.
For example, the insurer might specifically ask if your house is in a flood zone, rather than expecting you to declare this yourself without being asked directly.
We support the proposed changes and look forward to seeing what improvements are put forward. Removing the general declaration question will be an important step towards more equal expectations between you and the insurer.
Learn more from leading law firm Minter Ellison, with a useful summary of the review.