When Can Insurers Reject a Claim

Insurers can reject a claim, if you do not disclose complete and accurate details of your risk.


Recently the Australian Financial Complaints Authority (‘AFCA’) supported an insurers decision to decline a $14k claim because the insured failed to disclose a performance modification to their car.

The cause of the claim was unrelated to the modification and traditionally would be covered under the insurer’s comprehensive policy wording. However, when the insured lodged the claim, the insurer became aware that the car had been fitted with an aftermarket turbo charger which had not been disclosed.

This modification placed the car outside of the insurer’s acceptance criteria and the insurer argued that they would never have accepted the risk had they know about the modification.

On this ground, AFCA found that the insurer was within their right to decline the claim.

Read the full story here


Your Duty of Disclosure

When purchasing or renewing an insurance policy, you have a duty to advise your insurer of anything that you know, or could reasonably be expected to know, that may affect the insurer’s decision to insure you and on what terms.

The key takeaway from the above claim, is that the performance modification had no impact or cause in the accident. The vehicle was stationary at the time of damage. However, due to non-disclosure, the insurer denied the claim.

So, for business owners, when considering your business insurance policy, some of the information you need to disclose accurately and completely include;  

  • All business activities,
  • Annual sales,
  • Industries your business works within,
  • Sites or places that you perform your work,
  • Imports and Exports,
  • Construction of your premises, including any Expanded Polystyrene material.

If you’re a commercial property owner, one of the key disclosures are your tenants. This includes disclosing when the tenancy is vacant as well.

If you’re unsure of what information you need to disclose to your insurer, we highly recommend you discuss the matter in detail with your insurance broker.

For more information, contact us today.