Insurer Must Pay After Unfounded Fraud Allegations
Insurer Must Pay After Unfounded Fraud Allegations
1
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
A leading insurance company has been ordered to cover a fire damage claim submitted by a policyholder who passed away from cancer two years ago, highlighting the consequences of unjust fraud accusations.
The claim was initially submitted in January 2022 for damage incurred to the man’s remote metal home in New South Wales. The insurer denied the claim on the grounds that the property was fraudulently misrepresented in terms of its status and functionality.
The policyholder, under heavy medication due to his illness, was questioned by the insurance company’s investigators. Unfortunately, he passed away roughly five months following the submission of the insurance claim. His estate's executor took over the complaint afterwards.
Recently, the Australian Financial Complaints Authority (AFCA) determined that the insurer, IAG, did not provide adequate evidence showing that the policyholder had breached his disclosure commitments. Thus, they must honour the claim.
According to AFCA, “Even if there had been a breach, the insurer has not convincingly shown that it resulted in the renewal of the policy when it would not have been otherwise. Thus, it is fair that the insurer accepts the claim.”
AFCA pointed out that IAG did not submit a declaration from its underwriters to either prove it would not have undertaken or renewed the policy. Despite cautions regarding potential adverse inferences, the insurer failed to provide necessary documentation on its underwriting practices pertaining to this case.
Originally, IAG contended that the policyholder had wrongly described the condition of his property upon policy initiation in October 2019, claiming it was watertight, structurally sound, secure, well-maintained, and inclusive of functional kitchen and bathroom facilities, and specifying its construction date as approximately 2019.
The policy contained a clause explicitly stating, “We don’t insure buildings under initial construction.”
AFCA’s investigation found that, as of the relevant policy renewal date in October 2021, the property's construction was completed, and it had been continuously occupied for over a year, meeting structural and maintenance codes.
“Each renewal constituted a new insurance contract,” the ombudsman declared.
Moreover, AFCA emphasized that the allegation of fraud, which carries grave implications, wasn’t sufficiently supported given that for a misrepresentation to amount to fraud, it must be made either knowingly or recklessly.
EVEN if I had determined that the policyholder breached the disclosure duty-which I have not-the insurer did not provide necessary proof to show it would not have entered the 2021-22 policy period without the alleged breach,” AFCA noted.
In their ruling, AFCA also highlighted the insurance contract and product disclosure statements omitted critical information regarding the duty to avoid misrepresentation, relevant disclosure duties, or consequences of any such breaches.
For more information on the ruling, it can be reviewed here.
This article has been adapted from one originally published by Insurance News Magazine.
In a strategic move to cater to the growing number of Australian cruise enthusiasts, Allianz Partners has unveiled a cruise-specific travel insurance product in collaboration with Norwegian Cruise Line (NCL). This initiative aims to provide comprehensive coverage tailored to the unique needs of cruise travellers. - read more
Recent research commissioned by the Insurance Council of Australia (ICA) and the Department of Foreign Affairs and Trade's (DFAT) Smartraveller program has unveiled a concerning trend: approximately 14% of Australian travellers embark on international journeys without any form of travel insurance. This statistic has prompted Allianz Partners to urge Australians to reconsider the importance of securing adequate coverage before travelling abroad. - read more
In 2024, medical incidents emerged as the leading cause of travel insurance claims among Australian travellers, accounting for more than 40% of all claims handled by nib Travel. This trend underscores the critical importance of securing comprehensive travel insurance to mitigate the financial risks associated with medical emergencies abroad. - read more
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
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
Travel insurance is an essential consideration for Australians planning both domestic and international adventures. Whether you're jetting off to the beaches of Bali or exploring the bustling streets of Sydney, understanding the intricacies of travel insurance can protect you from unforeseen incidents that could derail your plans. - read more
Travel insurance fraud involves deceitful practices that take advantage of insurance policies designed to offer protection against travel-related risks. It can manifest in various forms, such as exaggerated claims or false reporting of lost items, aiming to gain an undeserved financial benefit from the insurer. - read more
Travel plays a significant role in family bonding. There's nothing quite like exploring new places together, creating lasting memories, and experiencing adventures that will be talked about for years to come. - read more
Travelling is an exciting adventure, but it comes with its own set of uncertainties. That's where travel insurance steps in, offering peace of mind by covering unforeseen expenses and emergencies. However, filing a travel insurance claim can sometimes be a daunting process. - read more
Picture this: You're all set for your dream vacation. Suitcases packed, tickets in hand, and the excitement building. But then, an unexpected disappointment hits. Your flight is cancelled. Suddenly, your well-laid plans are thrown into disarray. - read more
Knowledgebase
Loss Ratio: The ratio of claims paid by an insurer to the premiums earned, used as a measure of profitability.
