Probably one of the most important documents you will ever fill in, but regrettably also one of the most boring is your insurance proposal.
Because you’re reading this in a motorcycle magazine I will concentrate on Road Traffic Act insurance, but exactly the same principles apply to all consumer insurance including home, travel, critical illness and life cover.
Before I get into the current law it is worth reminding you of the pre-2013 position, because plenty of insurers will try to persuade you that this position is still good law.
Your duty as a consumer
Prior to 2013 it was your duty as a consumer to tell the professional insurer anything which might lead them to increase their premium, without them asking you. The burden was upon you.
This particularly harsh line ended in April 2013 and the current rule can be summed up as; ‘if your insurer cannot be bothered to ask. then you do not have to volunteer’. And this has led to a change in how insurance proposals are drafted.
Prior to 2013 insurers very much liked ‘assumptions’ in the knowledge that most consumers would scan read the insurance proposal, sign it and send off the premium, and those uncorrected assumptions gave many feet of wriggle room.
Now the proposal will have direct questions, reflecting the change in the law. Typically you will be asked, ‘do you have any fixed penalty points?’ Or, ‘do you have any criminal convictions?’ Or, ‘have you ever been refused insurance or had a policy voided?’
You need to answer carefully and honestly. If you answer dishonestly your insurer can refuse payment to you and, in the nightmare scenario of the use of your motorcycle seriously harming another person, your insurer will have to meet any proper compensation claim brought against your use of the motorcycle, but they can come after you for reimbursement.
If you have answered carelessly the insurers still have a trick up their sleeve. They know their underwriting and if they say, ‘had we known the answer to the carelessly answered question was different we would have raised the premium by 30%,’ they will pay you out 70% of the full claim.
Because they hold the underwriting information which you can only challenge by obtaining your own underwriting evidence, they hold the aces. You can challenge this through the courts but it is expensive.
Their ultimate weapon is to ‘void’ your policy, a nuclear weapon which insurers are quick to deploy in an insurance dispute. If an insurer voids a policy you have to declare that voidance in all other policies of insurance.
Most insurers will decline insuring you, and those that will have you by the short and curlies and the premiums will reflect this. Rescission of a voidance is the most common thing I have to do directly to insurers. It is not something you can leave.
So when you fill in your insurance proposal, do so carefully. If you want to challenge it later in the day you will be playing for a five-a-side team against an 11 strong team at their place, and the referee, the Financial Ombudsman Service, does not hold the reputation of being particularly consumer focused.
Bike Magazine September 2020