SO IT’S NOT OK TO LIE ON INSURANCE FORMS
But Supreme Court controversial ruling may still lead to higher premiums
Fears that a recent Supreme Court judgement will allow fraudulent insurance claims to be made with impunity have been dispelled – but industry experts, including a senior executive with the Association of British Insurers (ABI), warn of the risk of higher premiums.
The judgement overturned previous law by allowing a false statement made to an insurer regarding an ongoing claim to be treated as irrelevant – on the basis that it didn’t affect the validity of the claim. As a result, the insurer was not permitted to reject the claim on the basis of that false statement.
However, it has since been confirmed that the judgement applies only where a false statement that has no relevance to the validity of the claim is made to an insurer in support of a claim.
It does not – as initially feared by some – affect a person’s obligation to disclose all material facts to an insurer when making a proposal for insurance. Likewise, it doesn’t affect an insurer’s right to treat an insurance policy as being void from the start if the insurer subsequently discovers that material facts have not been disclosed to them at the proposal stage.
The judgement does not give an insured person the right to commit fraud by, for example, lying in order to turn an invalid insurance claim into a valid one or inventing losses that he or she has not actually sustained. An insurer faced with a fraudulent claim remains entitled to reject the claim. And anyone committing fraud can expect to face criminal charges.
Experts do fear the judgement will result in higher premiums, as reported in our 3 August issue.
James Dalton, director of general insurance policy at the ABI, warned: ‘This decision risks pushing up the cost of insurance and prolonging the pay-out process for the vast majority of people who are honest customers.’
His comments about increased premiums were echoed by Kevin Pratt, a consumer affairs expert with moneysupermarket.com, who said: ‘The one worry is that, if insurers are paying more claims as a result of this ruling, then they will increase premiums.’ ‘This decision risks pushing up the cost of insurance for honest customers’ JAMES DALTON, ABI