Applying for life insurance
When you apply for a life insurance policy, we conduct a process called underwriting. It’s how we decide whether we can cover you, and if so on what terms and for what premium.
We will ask questions we need to know the answers to. These will be about your personal circumstances, such as your health and medical history, occupation, income, lifestyle, pastimes, and current and past insurance.
The information you provide in your application is vital to our decision.
If your application is for a new policy and your application is accepted, the policy will be a consumer insurance contract. If your application is to vary your policy and your application is accepted, the policy will be treated as a consumer insurance contract to the extent of the variation.
The duty to take reasonable care not to make a misrepresentation
When applying for insurance, there is a legal duty to take reasonable care not to make a misrepresentation to the insurer before the contract of insurance is entered into.
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 the duty is not met
If the duty is not met, this 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.
Please note that there may be circumstances where we later investigate whether the information given to us was true. For example, we may do this when a claim is made.
What can we do if the duty is not met?
If you or the Life Insured do not take reasonable care not to make a misrepresentation, there are different remedies that may be available to us. These are set out in the Insurance Contracts Act 1984 (Cth). These are intended to put us in the position we would have been in if the duty had been met.
For example we may:
- avoid the cover (treat it as if it never existed);
- vary the amount of the cover; or
- vary the terms of the cover.
Whether we can exercise one of these remedies depends on a number of factors, including:
- whether you or the Life Insured took reasonable care not to make a misrepresentation. This depends on all of the relevant circumstances;
- what we would have done if the duty had been met – for example, whether we would have offered cover, and if so, on what terms
- whether the misrepresentation was fraudulent; and
- in some cases, how long it has been since the cover started.
Before we exercise any of these remedies, we will explain our reasons, how to respond and provide further information, and what you can do if you disagree.
Policies to which the duty of disclosure applied
The duty to take reasonable care not to make a misrepresentation was introduced in 2021. Life insurance policies taken out prior to this duty being introduced were subject to a different duty, known as the duty of disclosure.
The duty of disclosure will continue to apply to those policies. However, if changes are subsequently made to those policies, such as adding one or more new kinds of cover or increasing the insured benefits, then the duty to take reasonable care not to make a misrepresentation will apply to the policy, to the extent of the change.