Why You Need to Reveal All

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Utmost good faith is one of the fundamental duties under a contract of insurance. It requires those applying for insurance cover to disclose all material facts about the risk being proposed to the insurer. It also requires insurers to deal openly and honestly with policyholders.

A material fact is one that would influence an insurer’s decision as to whether or not to accept the risk as proposed and on what terms and conditions. Examples may include accurate construction details of the premises; whether it is fully occupied and information about any other occupants; the business processes; any previous losses; any convictions of directors or principals etc.

Even after the contract of insurance has come into force, there is a continuing duty of disclosure: if there is any alteration to the risk, such as new premises, there is a duty to disclose this straight away.

This duty of disclosure might even be expressly incorporated within your contract e.g. your personal accident policy might include a condition requiring you to notify your insurer of any change of occupation or sports activities.

Non-disclosure of a material fact, whether innocent or deliberate, gives the insurer the right to avoid the contract from its inception.

The duty to disclose all material facts also applies on renewal. As a check at the renewal of your policy, make sure you have remembered to inform your broker and/or insurer of all material facts and any changes in your circumstances or other risk information.

If you are in any doubt as to whether or not certain information relating to your insurance risk is material, it is sensible to disclose it. After all, any increased terms cost less than repudiated claims. Always review your information with your broker.

Insurance will be provided through members of the Willis Commercial Network, who are authorised and regulated by the Financial Services Authority

FP658

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