Watchdog Consumer NZ has been campaigning for legislation to restrict an insurer’s ability to cancel a policy on the grounds of non-disclosure, because it says consumers who act in good faith can be penalised.

The Insurance Council has revamped its Fair Insurance Code to include a requirement for insurers to treat non-disclosure reasonably. In cases where non-disclosure is discovered, if a claim is to be paid the insured will have to pay the difference between the premiums they were charged for their policy and what they would have been charged, had they fully disclosed.

But many health insurers are not signatories to the Code, which largely applies to general insurers.

Commentator David Whyte, former general manager of AIA in NZ and managing director of AIG Life in Australia, said there was a need for a more precise framework to manage the issue of non-disclosure for the life insurance industry.
“Having been on both sides of claims cases which have been vehemently disputed by both parties, it make sense to lay down some more precise ground rules to avoid continual subjective interpretation – or misinterpretation – of policy conditions around the non-disclosure issue.”

He said consumers could not be expected to remember every detail of their personal health record.

Konnect Net, a provider of business process management solutions to the insurance, health and finance sectors, could be a solution, he said.

“Most companies subscribe to the Konnect Net Ltd medical data retrieval service, and by now, I suspect most GP practices and medical centres also participate. So why doesn’t someone take the lead and set up a deal with Konnect Net Ltd to retrieve medical notes for every application received?”

He said it would make things easier for consumers if they could apply with a product that attached a medical note from their GP. “It’s an idea to get the database accessible for every application. It’s in the formative stages.”

He said there would be a cost attached but it would not be insurmountable. “If you factor in all the direct and indirect costs around disputing claims due to non-disclosure, then this proposal makes even more sense. Whatever the industry response to non-disclosure – inadvertent or otherwise – may be, one thing is certain – the issue and the ill-will generated by the current state of affairs will not disappear, and some measures have to be adopted to deal with this sooner rather than later.”