Non-disclosure

Your insurance claim can be declined if you haven’t shared important information about yourself or your property with your insurer. Read this guide to find out what you need to tell your insurer to avoid problems.

What is non-disclosure?

Non-disclosure means not providing important information about yourself or your property to your insurer. When you first arrange an insurance policy, and at each renewal, the law says you must tell your insurer about anything that could affect its decision to insure you; this includes whether it might impose an exclusion, or additional premium or defer cover, or change the terms on which it would offer insurance (this information is called “material information”). If you do not tell the insurer, it is called “non-disclosure”. 

The remedy an insurer has when you fail to disclose material information, is to avoid or cancel the policy back to the beginning and treat it as if it never existed. One of the most serious aspects of this is that you can find yourself in a position where you have no insurance and, because of the non-disclosure, you cannot get any more insurance to replace what you had.

Where there has been non-disclosure of material information and it is found at claim time, insurers will sometimes take the action they would have taken if they had been told. This means they might reduce the cover, increase the premiums or place an exclusion on cover. However, this is a better result for you than having no cover at all.

Why is it an issue for consumers?

When you have an insurance policy, you expect you will be covered if something unexpected occurs. If there has been non-disclosure, you may find you do not have cover when you need it. 

The consequences of non-disclosure are serious. Even if you accidentally leave out details, your claim could be declined and the insurer could cancel your policy. Non-disclosure can also impact your ability to obtain insurance cover in the future. 

Health insurance leaving out medical details

Real life examples

Yasmin’s* spinal injuries      

When applying for a health insurance policy, Yasmin did not tell her insurer about two spinal injuries several years before. The next year, Yasmin made a claim for healthcare costs for a cyst on her spine. If Yasmin had told the insurer about the spinal injuries when she applied for the policy, the insurer would have added a lumbar spine exclusion to Yasmin’s policy. The insurer was able to cancel the policy from the beginning, but offered to retrospectively add the exclusion to Yasmin’s policy so she could keep the policy. The insurer did not have to pay Yasmin’s claim.

Bob’s* criminal convictions  

Bob had car insurance. At annual renewal, Bob did not tell his insurer that he had been convicted for stealing a boat that year. After the policy renewed, Bob damaged his car in an accident and made a claim to his insurer. The insurer cancelled Bob’s policy back to the date of renewal and declined his claim. The insurer would not have renewed Bob’s policy if it had known that he had been convicted of theft. 
 

Chris’s* Dangerous Building Notice 

Chris’s rental property was badly damaged in a fire and he made a claim to his insurer. During the claim assessment, the insurer became aware that the house was in disrepair and Chris had received a Dangerous Building Notice. Chris knew about the condition of the house and the Notice, but had not told the insurer this information when he applied for the policy. The insurer cancelled the policy from the beginning and declined to consider the claim, because it would have never insured the house if Chris had provided this material information. 

Jin’s* anaemia diagnosis      

Jin died after being diagnosed with Stage 4 colon cancer at age 31. When Jin took out a trauma and life insurance policy several years earlier, he did not tell his insurer about a colonoscopy when he was a teenager, or about a nutritional anaemia diagnosis. Jin had vague recollections about these but did not think they were important - he did not think to tell the insurer about them. On review, Jin’s anaemia diagnosis was material information for the insurer, because it would have only offered him reduced cover when Jin applied for the policy. While the insurer could have cancelled the policy from the beginning, it paid Jin’s life claim for the reduced cover it would have offered, being half of his life benefit.    

*Names have been changed

See more non-disclosure case studies

Things to know about non-disclosure

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  1. Why you need to tell your insurer everything

    You have full knowledge of your situation and knowledge of any property you would like insured. The insurer relies on the information you provide to assess the risk and decide:

    • If it will cover you
    • What it will cover you for, and 
    • The amount it will charge you.

    This is why it is very important to disclose everything that could be relevant to the insurer’s decision to provide insurance. 

  2. What information to give your insurer

    Different insurance policies will require different information. Make sure you read the questions in the application carefully and answer them in full. 

    For house, contents, travel and car insurance, the information you will need to provide includes:

    1. Your insurance history and previous claims
    2. Any criminal or traffic convictions 
    3. If you have been bankrupt
    4. Details of any property that will be insured. For example, any non-factory vehicle modifications to your vehicle, or any pre-existing damage to your house. 

    For life, income protection, travel and health insurance you will need to provide information about your medical history. It’s important to tell the insurer everything, even something as simple as having felt stressed or having a sore back that you may have discussed with your doctor.  It may not matter it was not diagnosed as a medical condition, or that you did not get any tests or treatment for it.  If you have difficulty remembering your full medical history, get your medical notes from your doctor to check the answers. Insurers do not automatically ask your doctor for information, even if you give them permission to do so on your application form. 

    If you are unsure about the information to provide, you can ask your insurer to help. 

  3. When you need to give your insurer the information

    You must give your insurer all the information it requires:

    1.  When you first arrange the policy; and 

    2.  Every time the policy is renewed. For house, contents and car insurance, this happens every year. 

    Sometimes, the policy will include a requirement for you to tell your insurer about any major changes during the year.

    Life insurance, income protection and health insurance policies also require you to tell insurers about anything that happens between completing your application and the insurance cover starting. This means if you visit the doctor, develop a health problem, or your situation changes after you complete the application, but before your insurance cover begins, you must tell your insurer.

  4. Insurers will respond reasonably to any non-disclosure

    The Fair Insurance Code applies to all insurance products except life and health policies. It confirms that Insurance Council of New Zealand insurers will respond reasonably to any information an insured person does not disclose. 

    Life and health insurers also understand the seriousness of non-disclosure for consumers and respond appropriately. 

    When investigating disputes, the IFSO Scheme reviews what is fair and reasonable in all the circumstances, including in situations of non-disclosure. 

    The reason for disclosing all material information is that insurers can avoid a policy back to the beginning and decline to consider any claim where there has been non-disclosure. The current law is very harsh and does not distinguish between innocent and deliberate non-disclosure.

  5. My insurer is not paying my claim due to non-disclosure – what do I do now?

    You are able to request a review of the claim decision through your insurer’s internal complaints process. If you are unhappy with the complaint response, you can ask the IFSO Scheme to investigate your complaint, for free. 

Tips to avoid problems

Answer everything

Read all of the questions on the insurance application carefully and answer all of them in full, even if you don’t think they are relevant e.g. if you had a sore back, went to the doctor and got some medication so it went away, you still need to tell the insurer.

Contact your insurer if you forget to include something on the application 

They will let you know if there will be any changes to your policy or premiums.

Check your application if someone else, like a financial adviser, has filled it in for you

If a financial adviser or another person fills in the insurance application for you, read through the questions and answers carefully before signing it, to make sure it is accurate and includes all of the information you have provided.

Let your insurer know any changes when you renew your insurance

When you renew house, contents or vehicle insurance, tell the insurer about any events (convictions, speeding, accidents, losses, etc) that have happened since the last renewal.

Ask if you can’t remember

If you can’t remember your full medical history, ask your doctor for a copy of your medical notes, and double-check the insurance application. In some cases, it may be appropriate to provide the insurer with your medical notes.           

View a pdf version of the information on this page.