Misrepresentation on proposal form

– Impact on insurer’s risk assessment

Detail in recording risks is critical at the inception of any insurance proposal as this may impact on a number of areas, including future claims under such a contract. This is what Mr M learnt when he submitted a vehicle claim in 2016.

The final 2018 edition of the OSTI Briefcase contains some interesting insights on several complaints, including the one of Mr M.


Mr M applied for cover in respect of a motor vehicle, household contents and personal liability with the insurer. The insurer’s application form required Mr M to advise on the following:

Insurance form questions/requirements Mr M’s answer
Detail of previous insurance Mr M confirmed previous insurance with Hollard Insurance and he provided details of a vehicle accident he had registered with Hollard Insurance in May 2016.
Disclosure whether any insurer had ever cancelled or refused to insure him or imposed any restrictions for any risks he wished to insure Mr M responded in the negative.
To advise whether there was any material fact that may influence the risk for which he had applied for. Mr M responded in the negative.
Vehicle to be covered A new Audi A4.

A few months after the policy incepted, Mr M removed the Audi A4 from cover and replaced it with a Jeep Cherokee instead. Mr M registered a claim for an accident which occurred in November 2016, whilst he was driving the Jeep Cherokee. The insurer rejected the claim on the ground that Mr M had failed to disclose material information at the inception of the policy.

Why did the insurer reject the claim?

During the validation of the claim the insurer established that Mr M had had two previous insurance policies with Santam Insurance and Hollard insurance respectively, information that he did not share with the insurer at application stage.

  • The insurer further established that Santam Insurance cancelled Mr M’s policy in February 2007 on the grounds that he was a multi-claimant.
  • The insurer also alleged that Mr M’s previous policy with Hollard Insurance was cancelled by Hollard Insurance after it had discovered Mr M’s previous cancellation with Santam Insurance.

Mr M’s argument

Mr M argued that the proposal form did not require him to disclose the cancellation of the Santam policy but instead enquired from him whether any insurer had ever cancelled or refused to provide cover for any risks which he wished to place on cover. He argued that he would be covering a brand new vehicle that was not covered before. The 9 years that elapsed between the two policies also formed part of his argument.

The insurer’s response to Mr M’s argument

The insurer submitted that an insurer is interested in the insurance history of a potential policy holder and not in the specific items intended to be covered. It argued that there was a legal obligation on a prospective policy holder to make full and frank disclosures to an insurer to enable the insurer to properly evaluate the risk.

Why did OSTI uphold the insurer’s rejection?

  • On completion of the proposal form Mr M did not reveal the detail of all his previous policies and insurers’ information.
  • There are no time lines attached to the questions in the proposal form.
  • The wording in the proposal form did not refer to the actual items to be insured but referred to the risks associated with the items to be insured and for which insurance cover was being proposed.

This OSTI case is a reminder of the client responsibility to provide the insurer with all the necessary information so that the risk can be correctly underwritten. The message to financial advisers is to ensure that your client understands the requirements, the industry jargon as well as the importance of revealing all previous losses or cover.

As OSTI noted in an article last year: “Be entirely truthful, give all the facts when taking out a policy or reporting a claim”.

Click here to download the latest Ombudsman Briefcase containing more case studies.

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