What are New legal disclosure requirements for customers taking out life insurance?
- 'The legal duty to take reasonable care not to make a misrepresentation'
The old duty of disclosure for consumer insurance was replaced in October 2021 with a similar but more insurance company-focused, with a Duty to take reasonable care not to make a misrepresentation to an insurer, under Section 20B of the Insurance Contracts Act
- This means customers entering into a consumer insurance contract will have a duty ‘to take reasonable care not to make a misrepresentation when completing their applications and answering any additional question asked of an Insurance Company prior to the issuing of the insurance policy.
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This same legal duty continues to exist only until the insurance contract is formally issued (and the policy is in force).
Wording that will be used for Duty to take reasonable care updates
To meet this duty, each person whose life is to be insured must also take reasonable care not to make such a misrepresentation.
- A misrepresentation is a false answer, an answer that is only partially true, or an answer which does not fairly reflect the truth.
- This duty also applies when extending or making changes to existing insurance, and reinstating insurance.
If you do not meet your duty
Not meeting your legal duty can have serious impacts on your insurance. Your cover could be avoided (treated as if it never existed), or its terms may be changed. This may also result in a claim being declined or a benefit being reduced.
