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Income Protection Insurance Australia
Income Protection Insurance Australia :: News
Insurance Claim Denied Due to Undisclosed Conviction
Insurance Claim Denied Due to Undisclosed Conviction
An insurance policyholder recently experienced the repercussions of non-disclosure after his claim was rejected by an insurer upon the discovery of an undisclosed traffic conviction.
The undisclosed criminal traffic offense led to repercussions from both the insurer and a financial authority, serving as a cautionary example for transparency in insurance agreements.
Holding a motor insurance policy covering a fleet of three trucks under his company, a director submitted a claim when one of the vehicles suffered fire damage. However, due diligence performed by Zurich Australia unveiled that the director had a criminal traffic conviction on record dating back to March 2021 that was not previously disclosed.
The insurance company took the position that this omitted information was pivotal and declared that it would have otherwise refrained from underwriting the policy. The director's defense rested on the claim that he perceived the incident not as a criminal offense but rather a trivial issue, describing the non-disclosure as unintentional.
Nevertheless, the Australian Financial Complaints Authority (AFCA) emphasized that the director faced pointed questions upon the insurance policy's inception that should have signaled the need for divulgence of the conviction. The adjudicator from AFCA concluded that the director, or any prudent individual in a similar position, ought to have recognized the importance of such information to the insurer's risk assessment.
The reported incident draws attention to a 'relevant failure' under the Insurance Contracts Act 1984, with Zurich within its rights to narrow its liability and proceed with the policy's annulment. The AFCA adjudician expressed that obliging the insurer to settle the claim under these circumstances would be unjust.
In the aftermath, the insurance company is required to return the paid premiums post cancellation of the policy to the policyholder along with accrued interest - a measure to settle the books between the parties involved.
This situation signals to policyholders the vital necessity of full transparency when acquiring insurance coverage. Insurance applicants and holders should be aware that nondisclosure, even unintended, can have significant consequences, impacting both the validity of claims and the standing of policies.
Published:Thursday, 2nd May 2024
Source: Paige Estritori
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Benefit and Wailting Periods: Choosing the Right Combination for Maximum Protection and Value In Australia, income protection insurance stands as a vital safeguard for professionals, ensuring security during times of unexpected illness or injury. It acts as a financial buffer, providing a percentage of your regular income, so you can maintain your lifestyle without the stress of lost earnings. - read more
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Knowledgebase
Term Life Insurance:
A life insurance that provides a cover for a specific period of time - usually one to five years or until the insured reaches age 65 or 70.
A life insurance that provides a cover for a specific period of time - usually one to five years or until the insured reaches age 65 or 70.