Insurer Must Pay After Unfounded Fraud Allegations

⚠️The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

The claim was initially submitted in January 2022 for damage incurred to the man’s remote metal home in New South Wales. The insurer denied the claim on the grounds that the property was fraudulently misrepresented in terms of its status and functionality.

The policyholder, under heavy medication due to his illness, was questioned by the insurance company’s investigators. Unfortunately, he passed away roughly five months following the submission of the insurance claim. His estate's executor took over the complaint afterwards.

Recently, the Australian Financial Complaints Authority (AFCA) determined that the insurer, IAG, did not provide adequate evidence showing that the policyholder had breached his disclosure commitments. Thus, they must honour the claim.

According to AFCA, “Even if there had been a breach, the insurer has not convincingly shown that it resulted in the renewal of the policy when it would not have been otherwise. Thus, it is fair that the insurer accepts the claim.”

AFCA pointed out that IAG did not submit a declaration from its underwriters to either prove it would not have undertaken or renewed the policy. Despite cautions regarding potential adverse inferences, the insurer failed to provide necessary documentation on its underwriting practices pertaining to this case.

Originally, IAG contended that the policyholder had wrongly described the condition of his property upon policy initiation in October 2019, claiming it was watertight, structurally sound, secure, well-maintained, and inclusive of functional kitchen and bathroom facilities, and specifying its construction date as approximately 2019.

The policy contained a clause explicitly stating, “We don’t insure buildings under initial construction.”

AFCA’s investigation found that, as of the relevant policy renewal date in October 2021, the property's construction was completed, and it had been continuously occupied for over a year, meeting structural and maintenance codes.

“Each renewal constituted a new insurance contract,” the ombudsman declared.

Moreover, AFCA emphasized that the allegation of fraud, which carries grave implications, wasn’t sufficiently supported given that for a misrepresentation to amount to fraud, it must be made either knowingly or recklessly.

EVEN if I had determined that the policyholder breached the disclosure duty-which I have not-the insurer did not provide necessary proof to show it would not have entered the 2021-22 policy period without the alleged breach,” AFCA noted.

In their ruling, AFCA also highlighted the insurance contract and product disclosure statements omitted critical information regarding the duty to avoid misrepresentation, relevant disclosure duties, or consequences of any such breaches.

For more information on the ruling, it can be reviewed here.

This article has been adapted from one originally published by Insurance News Magazine.

Published:Wednesday, 3rd Jul 2024
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Insurance News

Clear

Navigating Rising Premiums and Cybersecurity Risks in Australia's Insurance Sector

16 Mar 2026: Paige Estritori

As we progress through 2026, Australia's insurance industry is grappling with significant challenges that are reshaping the landscape for both insurers and policyholders. Two primary concerns have emerged at the forefront: the affordability of premiums and the escalating threat of cyber incidents. - read more

Introducing Backd: Affordable Insurance for Casual and Contract Workers

15 Mar 2026: Paige Estritori

In a significant move to address the insurance needs of Australia's growing casual and contract workforce, TAL has partnered with global insurtech company Cover Genius to launch Backd. This innovative digital-only insurance product aims to provide accessible and affordable life and income protection coverage to workers who have traditionally faced challenges in obtaining such protection. - read more

Zurich's Home Loan Protection: Tailored Insurance for Mortgage Holders

15 Mar 2026: Paige Estritori

Zurich has unveiled its Home Loan Protection (HLP) product, a new insurance offering that combines life and income protection benefits tailored specifically for mortgage holders. This innovative cover automatically adjusts its premiums as the insured's mortgage balance decreases, ensuring that policyholders are only paying for the coverage they need. - read more

Australian General Insurance Premiums Set to Surpass $144 Billion by 2029

15 Mar 2026: Paige Estritori

The Australian general insurance industry is on a trajectory for substantial growth, with direct written premiums (DWP) projected to exceed $144 billion by 2029. This forecast, provided by data and analytics firm GlobalData, reflects a compound annual growth rate (CAGR) driven by increasing demand for coverage in response to the rising frequency of natural disasters. - read more

Australia's A&H Insurance Sector Set for Steady Growth

15 Mar 2026: Paige Estritori

Australia's accident and health (A&H) insurance sector is on track for significant growth, with projections indicating an annual increase exceeding 4% through to 2030. This positive outlook is largely attributed to advancements in digital distribution channels and escalating health-related expenses. - read more

Click for more Insurance News