What is duty of disclosure?
Duty of disclosure refers to the legal obligation of an individual or organisation applying for insurance coverage to provide complete and accurate information to the insurance company. This information is used by the insurance company to assess the risk, policy acceptance and determine the appropriate premium for the policy.
In general, the duty of disclosure requires the policyholder to disclose any information that is material to the risk being insured. Material information is information that would influence the decision of the insurance company to offer coverage or the terms and conditions of the coverage offered.
For example, if a business is applying for property insurance
, they have a duty to disclose any known hazards or risks that could impact their property, such as a history of flooding or earthquake activity. Their previous claims history is also important to disclose.
Failure to disclose material information can result in the policy being voided or claims
being reduced or denied. It's important to understand and fulfill the duty of disclosure when applying for any insurance coverage, to ensure that the coverage provided is appropriate and adequate for the policyholder's needs.
The duty of disclosure does not only apply at new business stage but also before you renew your policy each year, extend, vary or reinstate an insurance contract at anytime.
You do not need to tell the insurer anything that:
- reduces the risk they insure you for, or
- is common knowledge, or
- they know or should know as an insurer, or
- they waive Your duty to tell them about.
It is a common misconception that clients believe all insurers and insurance brokers have access to all the same systems and believe they should already know a client claims history or past insurance information. This is a myth.
Remember to disclose anything the insurance company asks of you. If ever in doubt, discuss your requirements with a qualified insurance broker