Can Insurers Go Ahead with a Policy Knowing They Won't Pay out?

ddilrat on 27/12/2023 - 12:23
Last edited 27/12/2023 - 12:33 by 1 other user

This post got me thinking. Will car insurance cover hail damage if you specify you park in a garage but the car is parked on the driveway or street?

Can an insurer legally issue an insurance policy to someone if they know from the start that for some reason they won't pay out a claim.

Like in the above post example, say you ticked the box saying you park inside a closed garage normally but your house doesn't have a garage and you also have the same insurer for home insurance and stupidly they already know your home address and you don't have a garage.

Just wondering if they are allowed to still give you the policy with pre knowledge that they probably won't pay out for a myriad of claims.

Automotive Car Insurance Insurance

Comments

  • brendanm on 27/12/2023 - 12:39
    +21

    It isn't their job to cross check whether or not you a lying about where your car is garaged.

    Play stupid games, win stupid prizes.

    • HeWhoKnows on 28/12/2023 - 14:14

      Firstly the insurer is very clear about what they will and wont pay.
      Its spelled out in their disclosure/policy statement.

      You as the insured person state that you have provided proper disclosure when you take out an insurance policy.
      If you have lied or misled the insurer in any way they can refuse the claim.
      They are very clear about this fact as well

      Hence OP has got this all wrong
      Its not the insurer going ahead knowing they won't pay.
      Rather its the person applying for the insurance, going ahead making false statements, knowing the insurer wont pay if they find out.

  • trapper on 27/12/2023 - 12:47
    +2

    They know from the start only what your told them in the application, placing the responsibility on you to be honest.

    They don't delve further unless there's doubt triggered by a claim.

    If they uncover a significant falsehood material to the claim, then I wouldn't anticipate receiving any payout.

  • Euphemistic on 27/12/2023 - 12:55

    It’s a contract between two parties. It’s unlikely the insurer would cross check until the time of a claim - then they’ll accuse the claimant as not being truthful on the policy.

  • AndyC1 on 27/12/2023 - 13:15

    Read the PDS and the newer something.

    You have 10 or 14 days to read if from front to back to see what you have agreed to and if you have lied when taking out the insurance. If you have lied then they are in their right to not pay.

  • salmon123 on 27/12/2023 - 13:43
    +3

    Just wondering if they are allowed to still give you the policy with pre knowledge that they probably won't pay out for a myriad of claims.

    Yeah - it's how most consumer insurance policies in Australia work. Which is a shame, because if they end up denying a claim, they should refund the premiums they've collected, but that's never going to happen. Another reason why insurance is a scam.

    • netjock on 27/12/2023 - 14:04
      +1

      Governments look after big business.

      I am surprised people didn't realize when ALP put a price cap on gas rather than a gas reservation policy (example is the WA ALP government). The LNG producers sold as much overseas as possible and there was a potential shortage in Australia. No point having price cap if there is no gas.

      Before people jump on me. The LNP is guilty of the same thing. JobKeeper with no provisions for claw back, which genius thought of that up? The genius that looks after big business obviously. Where do people think the profits from those car parks where they are not needed go… big business of course.

      Giving PPE orders to their mates is another. How do you think selling a chair that is $100 from Bunnings for $1k through NDIS was possible.

      • salmon123 on 27/12/2023 - 15:38
        +1

        Giving PPE orders to their mates is another

        You forgot about the nuclear subs (368bn was it?) … and the 5.5bn golden handshake to our French friends!

    • Davo1111 on 27/12/2023 - 14:20

      Which is a shame, because if they end up denying a claim, they should refund the premiums they've collected, but that's never going to happen.

      why? You entered an agreement in which you said you'd be truthful. It's on you for breaching the agreement.

      In these cases, you're lucky they dont blacklist you, or proceed with fraud charges.

      • salmon123 on 27/12/2023 - 15:30

        why?

        Let's start with the Trade Practices act. There's several clauses that cover accepting payment without supplying a service. It stands to reason that if they deny a claim, they should be refunding premiums.

        In these cases, you're lucky they dont blacklist you, or proceed with fraud charges.

        Are you really worse off being blacklisted? I mean the insurance product was worthless for all practical purposes … not sure what kind of lunatic would voluntarily take out another policy and flush some more premiums down the toilet.

        I'd also argue that the insurance company should be the ones charged with fraud.

        • plmko on 27/12/2023 - 16:06
          +1

          Hard to argue you haven't received the insurance you paid for just because instance you were denied one part but then were genuinely covered for 99% of the rest like theft, accidents, fire etc

          "Worthless" is like AMP where dead people were sold life insurance. Or how Super auto adds insurance by default without being transparent. Can't say that's the same thing.

        • Davo1111 on 27/12/2023 - 20:19

          https://www8.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/con…

          (1) Subject to this Act, an insured has a duty to take reasonable care not to make a misrepresentation to the insurer before the relevant contract of insurance is entered into.
          (2) Whether or not an insured has taken reasonable care not to make a misrepresentation is to be determined with regard to all the relevant circumstances.

          Theres the act.

          There's several clauses that cover accepting payment without supplying a service.

          huh? The service is still valid, you get insurance for the vehicle provided you didnt mislead them.

          Example: You could have 3rd party F&T, car got into a prang, made a claim which got denied, then the car got stolen. You'd get paid out as per the policy.

          First page when i get a quote on the AAMI website.

          Your duty to us: no misrepresentation
          Before you buy, make changes to or reinstate this consumer insurance contract we will ask you questions. Your answers will be used to decide if we can insure you and on what terms.
          You have a duty to us under the Insurance Contracts Act to take reasonable care not to make a misrepresentation. To make sure that you meet this duty to us, it is important that you answer all questions truthfully and accurately.
          If you give us information that is not true and accurate, we may be able to reduce or refuse to pay a claim or cancel your policy, or both. If your failure is fraudulent, we may be able to refuse to pay a claim and treat the contract as if it never existed.

          So they spell it out.

          I mean the insurance product was worthless for all practical purposes …

          lol, no, it was worthless when you lied to them. They base their premiums on risk and asked you critical questions. You lied to get a cheaper premium.

          Plenty of other people took out the policy and got paid out.

    • Euphemistic on 27/12/2023 - 18:49
      +2

      Another reason why insurance is a scam.

      Not sure it’s a scam. It works out well for lots of people.

  • JimmyF on 27/12/2023 - 14:07
    +1

    Can an insurer legally issue an insurance policy to someone if they know from the start that for some reason they won't pay out a claim.

    In your example, they issued a policy based on questions answered by the OP, so if you LIED to get a 'cheaper' price, then yes they can reject the claim.

    The insurance company in your example, didn't know you are not parking it in the garage as you claimed and then found your garage is full of boxes and never been used to store the car!

  • altomic on 27/12/2023 - 14:10
    +7

    Customer making a claim - "someone hit my car".
    Insurer - "was it parked in your garage?"
    Customer- "no, I was shopping and parked in a supermarket car park"
    Insurer - CLAIM DENIED

    • Davo1111 on 27/12/2023 - 14:21
      +2

      citation needed

  • Unorthodox on 27/12/2023 - 16:31
    +1

    In the example given, the onus is really on the applicant to provide correct information to allow the insurer to determine if they are insurable and at what value.

    Best believe the insurance companies are well aware of asymmetric information and moral hazard. There's a reason why insurance companies will sometimes use private investigators / third parties to interview the claimant and even conduct investigation into the circumstances.

  • GordonD on 27/12/2023 - 18:09

    Insurers don't have to know anything more than you've told them in regard to that policy. If that means there is something you've told them in regard to other separate dealing you've had with them that means they won't have to pay out, then that's your problem, not theirs.

    But if there's something that they know or ought to know regarding that policy that means they'll never have to pay out on it, then its their problem. I believe that was the case with some policies brought to the attention of the recent banking royal commission. Banks had to refund something like a billion dollars in premiums for junk policies in the credit card and loan protection areas.

    An example was consumer credit insurance, which supposedly covered you if you couldn't make repayments, but there were so many conditions and limits that a lot was collected in premiums and almost nothing paid out.

    • Euphemistic on 27/12/2023 - 18:52

      That’s a good point. As much as denying a good faith claim creates a lot of headaches, if they have misrepresented the product then you may have recourse via the ombudsman or the courts. If you have not lied on the policy and carried out your due diligence they should not be able to deny a legitimate claim.

      • Davo1111 on 27/12/2023 - 20:22

        If you have not lied on the policy and carried out your due diligence they should not be able to deny a legitimate claim.

        Theres always a grey area, hence AFCA and the legal system.

        However if you lie on your policy, I doubt it's going to go your way.

  • Benno007 on 28/12/2023 - 09:56
    +2

    This reminds me of my confusion around renewing insurance. A few years ago we had an accident and made a claim. The same insurer issued a renewal, and I didn’t check the details so just paid the bill. After checking a year later, it says ‘you have told us you’ve been in no at fault accidents’… well, when I first got insurance, yes, but since then I’ve made a claim through this same insurer… and they don’t know about it? Am I actually insured? Who knows..

  • Roney on 29/12/2023 - 02:18

    It seems to me that we have very little protection against whatever the insurance fancies in their favour. Don't you think we need a stronger body than the AFCA, Ombudsman etc who only look at bigger cases than 'parking at friend's roadside" claim and their obfuscation tendency?

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