Ombudsman Directs RACT Insurance to Honour Car Crash Claim Despite Undisclosed Damage

The Australian Financial Complaints Authority (AFCA) has intervened to instruct RACT Insurance to process a claim for a policyholder who failed to disclose prior damage to his four-wheel drive.

Initially, when securing the insurance over the phone, the owner described the vehicle as being in "good shape" with only minor scratches.

However, post-accident assessments by RACT revealed damage that seemed to have existed before the incident.

According to the claimant, the superficial damage to parts such as panels, bumpers, and the tailgate occurred in two separate instances only after purchasing the policy. RACT acknowledged these claims of post-policy incidents but argued that they didn't explain all the observed damage, suggesting a misrepresentation of the vehicle's condition at the time of policy commencement.

Despite recognising the policyholder's partial misrepresentation, AFCA highlighted that RACT had not definitively proven it would have declined insurance had the accurate condition been disclosed. The insurer's guidelines indicate that cars with "extensive damage" are automatically ineligible for coverage; however, those with "some damage" may still qualify. AFCA determined that the identified damage likened more to "some damage" than the "extensive damage" that would categorically void coverage.

This determination underscores the significance of transparent communication between policyholders and insurers regarding vehicle conditions. It highlights the thresholds insurance companies apply in policy evaluations and the necessity of their transparency. This decision not only affects the insured's entitlement to coverage but also serves as a key precedent for similar cases, promoting greater clarity about what constitutes significant pre-existing damage that could deny coverage.

The decision sets a vital precedent in the insurance industry, reinforcing the need for clear disclosure guidelines and policies that articulate what qualifies as unacceptable pre-existing damage. Insurers might need to revisit and possibly adjust their underwriting criteria to ensure alignment with regulatory expectations and reduce disputes. For the consumer, this case serves as a reminder of the importance of full disclosure and understanding the conditions under which their policy operates.

Published:Friday, 3rd Oct 2025
Source: Paige Estritori

Share this news item:

Insurance News

Allianz Australia Penalised for Misleading Travel Insurance Information

11 Oct 2025: Paige Estritori

In a significant ruling, Allianz Australia Insurance and its subsidiary, AWP Australia, have been fined a total of $16.8 million for providing misleading information about their travel insurance products. The Supreme Court of New South Wales found that between 2016 and 2018, the companies misrepresented the extent of coverage available to consumers, leading to potential misunderstandings about policy benefits. - read more

Surge in Bali Travel Among Australians Leads to Increased Insurance Claims

11 Oct 2025: Paige Estritori

The allure of Bali continues to captivate Australian travellers, with a notable 43% increase in travel insurance policies purchased for the destination since the 2022/23 summer season. This surge has corresponded with a 50% rise in related insurance claims, now accounting for 16% of all claims submitted to Southern Cross Travel Insurance (SCTI) in 2024. - read more

Hidden Exclusions in Travel Insurance: What Australian Travellers Need to Know

11 Oct 2025: Paige Estritori

Australian travellers are being urged to carefully review their travel insurance policies to identify potential exclusions that could affect their coverage. Legal expert Peter Carter from Carter Capner Law highlights that certain activities, such as riding motorbikes or jet skis and consuming alcohol, are often classified as high-risk by insurers. Incidents occurring during these activities may lead to claim rejections. - read more

Cover-More's New Cancellation Cover: What Travellers Need to Know

03 Oct 2025: Paige Estritori

In a significant development for Australian travellers, Cover-More has unveiled a new trip cancellation product designed to offer broader protection against unforeseen disruptions. This initiative addresses common concerns among travellers about the limitations of existing cancellation policies. - read more

Allianz and Norwegian Cruise Line: A New Era of Cruise Travel Insurance

03 Oct 2025: Paige Estritori

In a strategic move to enhance travel protection for cruise passengers, Allianz Partners Australia has partnered with Norwegian Cruise Line to offer specialised travel insurance coverage. This collaboration aims to provide cruisers with policies tailored to the unique aspects of sea voyages. - read more

Click for more Insurance News

Travel Insurance Articles

10 Common Travel Expense Mistakes and How to Avoid Them

Travel can be an exciting adventure, but it often comes with a myriad of expenses that can quickly add up. From flights and accommodations to meals and entertainment, the costs can take a toll on your budget. - read more

Visa-Free Travel for Australians: A Look at Some Exciting Destinations

Travelling is one of life’s great joys, and for Australians, visa-free travel opens up a world of opportunities. The convenience and freedom that come with not needing a visa cannot be overstated. With just your passport in hand, you can explore countless destinations without the hassle of paperwork. This kind of travel liberty offers a spontaneous, exhilarating experience, allowing you to book a last-minute trip without worrying about securing a visa beforehand. - read more

Traveling on a Budget: Money-Saving Tips for Australians Traveling Overseas

Traveling overseas is an exciting experience yet can be challenging, especially for Australians on a budget. With careful planning and budgeting, it is possible to make the most out of your trip without breaking the bank. This article provides valuable money-saving tips for Australians looking to explore the world on a restricted budget. - read more

The Essential Guide to Travel Insurance for Australian Travelers

Planning a trip is always an exciting experience, but it’s essential to be prepared for unexpected events. This is where travel insurance comes in. For Australian travelers, having the right travel insurance can make all the difference, offering peace of mind and financial protection. - read more

How to Find the Best Travel Insurance Deals in Australia

Travelling is one of life's greatest joys, but it's not without its risks. This is where travel insurance comes into play for Australians. It ensures peace of mind, knowing that you're covered for unforeseen events such as medical emergencies, trip cancellations, or lost luggage. - read more

Knowledgebase

Subrogation:
The process by which an insurance company seeks to recover the amount paid to the policyholder from a third party responsible for the loss.

This website is owned and operated by Clark Family Pty Ltd (as Trustee for the Clark Family Trust) 43 Larch Street Tallebudgera QLD 4228, A.C.N. 010281008, authorised Financial Services Representative of Unique Group Broker Services Pty Ltd, Australian Financial Services License 509434. Visit the ASIC website for additional licensing information.

IMPORTANT: We are neither authorised nor licensed to provide finance or financial products and we do not offer any form of credit or other financial advice. All product enquiries and requests for financial and/or other advice on this website are referred to third party intermediaries, insurers and lenders - with whom you can then deal directly. We may receive a fee or commission from these third parties in consideration for the referral. Before any action is taken to obtain a product or service referred to by this website, advice should be obtained (from either the third party to whom we refer you or from another qualified intermediary) as to the appropriateness of obtaining those products having regard to your objectives, financial situation and needs. Whilst we have our own process for vaidating the legitimacy of our referral partners, you should always verify the credentials of your financial adviser before proceeding with recommendations that they may present. Visit the ASIC website for further information.