Fairer playing field required

Fair Go viewers will be familiar with the sad case of Shane Laker, whose insurance company refused to pay out on his income protection policy because he failed to disclose unrelated health conditions. Shane, whose story was reported in May, will be only one of many consumers caught out by insurance application processes that fail to ask specific questions about pre-existing conditions. As we wait for the outcome of the Government’s review of insurance law, it seems timely to discuss whether consumers should be expected to know everything an insurance company requires, or merely be obliged to answer the questions put to them honestly.

In general, the current law allows insurers to ask very few questions at policy creation. There is often very minimal underwriting and nondisclosure issues are not brought to the customer’s attention. It is only at claim time that non-disclosure issues are raised – and then it is too late for the customer to make other insurance arrangements or accept a loading.

One of the reasons for this is, in the past, it was costly to ask questions, costly to underwrite, costly to offer customised terms, costly to gather information, and costly to communicate. It was not possible to ask a long list of questions, and it was not possible to

A government review of insurance law, under Commerce and Consumer Affairs Minister Kris Faafoi, should see the law ‘‘amended to allow a range of remedies’’ for non-disclosure, including partial payments’’, Michael Naylor writes.