What You Have to Tell Your Insurer (And What Happens If You Don't)
Last week I wrote about income protection insurance - what it is, why only 6% of people in the UK have it, and why that number should be much higher. If you missed it, it's worth a read.
This week I thought I’d talk about something that I find interesting - disclosure. This is a wonderful example of old-fashioned, historical law stuff but also how the law has been changed to reflect actual real life - two of my favourite things!
Disclosure is about what you tell your insurer as you’re applying for a policy and what information they expect you to give them. We’ll discuss in this blog what you have to tell your insurer when you take out a policy, what happens when something gets missed, and what to do if you realise after the fact that you haven't told them something you probably should have.
This matters because the moment most people discover they got disclosure wrong is often the moment they're trying to make a claim and that's a terrible time to find out.
The Law Changed In Your Favour!
Before 2013, UK insurance law was governed by principles dating back to the Marine Insurance Act 1906. Under those rules, you had a strict duty to volunteer any information that might be relevant to your insurer, whether they asked for it or not. If you forgot something, or didn't realise it was relevant, they could void your policy entirely. Which meant no payout for you and there was no appeal. Kind of shitty hey.
The Consumer Insurance (Disclosure and Representations) Act 2012 - known as CIDRA - came into force in April 2013 and changed over a century of settled insurance law. For consumers, it replaced the old duty to volunteer all material information with a simpler duty which is to take reasonable care not to make a misrepresentation during pre-contractual negotiations.
So in plain terms, you no longer have to guess what might be relevant and volunteer it unprompted. Your job is to answer the questions you're asked honestly, carefully and completely.
What ‘Reasonable Care’ Actually Means
A statement can be a misrepresentation even if it's technically true but incomplete. And if you don't respond to a request to confirm or amend details previously given, that can also count as a misrepresentation.
Reasonable care is assessed in context - your age, the type of policy, how clearly the questions were worded and whether an agent like an insurance broker was working on your behalf. An ambiguous question that you answered in good faith is treated very differently from a clear question you brushed past because you didn't want to think about it.
What Can Actually Happen If You Don't Disclose
The Act distinguishes between three types of misrepresentation: reasonable, careless and deliberate or reckless.
If your non-disclosure was honest and reasonable - you genuinely didn't know the information was relevant, or the question was unclear - your insurer must simply pay the claim.
If the misrepresentation was careless, the insurer's response should be based on what they would have done had you answered correctly.
If they would still have offered the policy but charged a higher premium, they should still pay the claim - but proportionately. So if you paid £100 when you should have paid £150, they would pay two thirds of the claim.
If they would have instead offered the policy but on different terms, the company has to act as if the terms were in place all along and that might mean that the customer is no longer covered in the current circumstances.
If they wouldn’t have offered the policy in the first place, they can cancel the policy but must refund the premiums.
3. If the misrepresentation was deliberate or reckless, the insurer can void the policy and keep the premium. That's the worst case and it's reserved for situations where someone knowingly gave false information.
The important thing to know is that most non-disclosure isn't deliberate. Most of it is careless - a question misread, a diagnosis half-remembered or maybe a condition that felt too minor to mention. And under current law, carelessness is treated proportionately rather than catastrophically.
What To Do If You Realise You've Missed Something
Contact your insurer or broker as soon as possible. Insurers are required to treat customers fairly, and the law gives you more protection than most people realise. Keeping records of every disclosure and getting professional help if you're unsure can be worth doing.
Don't wait until you need to make a claim to sort it out. Proactively correcting a mistake before a claim is a very different situation to it being discovered during one.
If you used a broker - which I have recommended in quite a few cases - call them. This is exactly what they're there for.
Some Questions People Might Wonder About
What questions do insurers actually ask?
Depending on the insurance, they might ask about medical history, occupation, smoking status or criminal convictions.
Does disclosure apply at renewal?
The short answer is yes, you are expected to take proper care and consideration here too and it's easy to forget that your circumstances change over time so be careful.
What about life changes mid-policy?
Generally no, unless the policy says otherwise, so worth making a note of when you first take a policy out.
To Finish With
The law is more on your side than most people assume, but you must engage with it.
When I think about the differences in my life over the last five years - how much money I have and earn, potential future earnings, my health situation, my living situation, the things that I own - it’s clear I am in a very different position than I was even if those changes have felt kind of gradual. It’s clear that if I was renewing an income protection policy or even taking a new one out I would have to be thinking very clearly about the situation as it actually is. Knowing myself, I think I’d be planning to sit down beforehand and have a proper think and take some notes - even typing now I’m having little flashes of something half remembered here and there.
This is proper stuff, nothing to get flustered about, but worth knowing and taking seriously.
If you’re interested in chatting through your financial situation right now, exploring some potential avenues and making some proper plans to get your finances sorted - my financial coaching is open for business!
Book here!
Love Eleanor. Xxx
