The Duty of Disclosure
by Luke Ashworth
The duty is on the insured to disclosure any material fact to the insurer. Basically the insured should know their own details. The life insurance insurer who may know nothing about the insured to begin with can not be expected to ask all the relevant questions. So whilst the insurer should ask sensible questions it is under UK law still incumbent of the insured to advise a material fact.
A material fact is basically any fact which may make an insurer charge more or less premium or a fact which may make the insurer decline or accept the risk or only take the risk subject to additional conditions.
As an insured you can not hide a material fact simply because the insurer did not ask the right question.
So initially the onus is on you to provide all relevant information. However the law is also there to protect you as well. There have been several agreements between the major life insurance insurers and governing bodies and trade associations whereby insurers are required to point out your obligations to advise material facts. Insurers are expected to ask questions about those matters which have commonly proved to be material.
Generally courts would not expect you to disclose a fact which on the face of it would not be considered material on its own. There was a case where a person was having occasional headaches but thought they were just that and did not attribute anything else to the matter. Now an experienced doctor may consider the headaches as perhaps the possible on set of symptoms of a more serious nature and therefore request further investigation. But in that particular case the court held that the insured had no reason to believe the worse. He had no reason to believe that these headaches might be a material fact instead he thought that they were just an occasional headache. The court held that a reasonable man would not be expected to know that the occasional headache might be material. So the insured knew of the fact but would not have been expected to know that it was material.
The courts however considered that an insured whose doctor had sent him to the hospital for a kidney problem should have advised his insurer even if the insured was not aware how serious the situation might have been at the time. The question of materiality was not based on the insured�s ability to judge if the fact was material but on that of the life insurance insurer who had access to professional advice. In this case the insured knew of the fact and we assume also considered that it might be material, but decided to use his judgment on whether or not it was material. Another court case determined that the information is based on the insured�s knowledge and does not require him to make extensive investigation before answering the question.
The duty of disclosure continues until the contract of insurance is concluded. So information that you learn about whilst the proposal form is still being considered should be advised.
So as a general rule advise all details which could be material. It is not your job to decide what might or might not be material. If you learn of something late in the day before the contract is concluded then still advise it. If you do not then the risk is that the policy may not be valid and if a claim was presented it may not get paid.
The author is Keith Clark who acts as a compliance consultant for Free to Work Consultancy. Keith is a Fellow of the Charted Insurance Institute.
This article was written on the 15th February 2007. This article does not represent �financial advice� as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase. The views in this article represent those of the author and not those of Netbasic Limited.
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