Telling your insurer the truth: the Consumer Insurance (Disclosure and Representations) Act 2012 explained

One of the most painful insurance disputes is when you make a claim and the insurer says: “You didn’t tell us about X when you took out the policy, so we’re not paying.” For consumers, the law that governs this is the Consumer Insurance (Disclosure and Representations) Act 2012, often shortened to CIDRA. It changed the rules significantly in consumers’ favour, and it is worth understanding before you fill in your next application or renewal.

Who and what it covers

CIDRA applies to consumer insurance contracts: insurance taken out by an individual wholly or mainly for purposes unrelated to their trade, business or profession. Think home, motor, travel, pet, life and private health insurance. It applies to contracts entered into or varied on or after 6 April 2013, and it applies across the UK, so this is one guide where Scotland and Northern Ireland are covered too.

Business insurance is covered by a different law, the Insurance Act 2015, which places a heavier duty on the policyholder (see what insurance does a small business actually need?).

The old rule and the new rule

Before CIDRA, consumers were under a broad duty to volunteer anything a prudent insurer would consider material, even if they were never asked about it. An innocent mistake could let the insurer treat the policy as if it had never existed and refuse every claim.

CIDRA replaced that duty. Now the consumer’s duty is to take reasonable care not to make a misrepresentation to the insurer. In plain terms: answer the questions you are asked honestly and carefully. You no longer have to guess what else the insurer might want to know, which puts the onus on insurers to ask clear, specific questions.

The Act also says that failing to confirm or amend information you gave earlier, for example when an insurer sends renewal details and asks you to check they are still correct, can count as a misrepresentation. So read renewal documents properly rather than letting them roll over unread.

What counts as reasonable care?

The test is generally what a reasonable consumer would have done in the circumstances. Relevant factors include the type of policy and its target market, the explanatory material the insurer provided, and how clear and specific the questions were. If the insurer knew, or ought to have known, something about you that made a difference, such as a particular vulnerability, that can be taken into account.

Answering a vague or confusing question in a sensible way is not a failure to take reasonable care. Equally, a question on a comparison website or online form is still a question, and your answer counts.

What the insurer can do if you get it wrong

The insurer only has a remedy for a “qualifying misrepresentation”. The misrepresentation must have made a difference: without it, the insurer would not have offered the policy at all, or would only have offered it on different terms. If it would have made no difference, the insurer has no remedy. Where there is a qualifying misrepresentation, what happens depends on why it was made.

Deliberate or reckless

If you knew the answer was untrue or misleading (or didn’t care whether it was), and knew (or didn’t care) that it mattered to the insurer, the insurer can treat the policy as if it never existed, refuse all claims, and keep the premiums unless it would be unfair to do so. It is for the insurer to show that the misrepresentation was deliberate or reckless.

Careless

If the mistake was careless rather than deliberate, CIDRA gives the insurer a proportionate remedy, based on what it would have done had you answered correctly:

• It would not have offered cover at all: it can treat the policy as if it never existed and refuse claims, but must return the premiums.
• It would have offered cover on different terms (for example, with an exclusion): the policy is treated as if it had included those terms. If the claim would have fallen within that exclusion it won’t be paid; if not, it should be.
• It would have charged a higher premium: it can reduce the claim proportionately. For example, if you paid £300 but should have been charged £600, the insurer need only pay half the claim.

These outcomes can combine. Insurers will usually rely on their underwriting criteria to show what they would have done, and you are entitled to ask to see the evidence.

Practical tips

• Read every question slowly, and answer the question asked, not the one you expected.
• If a question is unclear, ask the insurer or broker what it means and keep a note of the answer.
• Keep a copy or screenshot of your answers, especially when buying online.
• Check the “statement of fact” or summary of your answers that the insurer sends, and correct anything wrong straight away.
• At renewal, check the information again. Changes in health, convictions, claims, occupation, who drives the car or how a property is used may all be relevant to the questions asked.
• If in doubt, tell them. It costs nothing to mention something the insurer then says doesn’t matter.

If your claim is refused for misrepresentation

Ask the insurer to identify the exact question, your answer, why it says the answer was wrong, whether it says you were careless or deliberate, and what it would have done had it known. If you disagree, use its complaints process and, if necessary, the free Financial Ombudsman Service. My guide to complaining about an insurer explains how. You can read the Act itself on legislation.gov.uk.

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