Ombudsman wants change to disclosure rules
Stevens says about a quarter of the cases the ISO deals with relate to non-disclosure and consumers simply do not understand what they need to disclose.
She wants to see the existing "prudent underwriter/insurer test" - used to determine what a consumer is legally expected to disclose to ensure their policy is valid - to be replaced by a "reasonable person test", as used in Australia.
The common law based "prudent underwriter test" requires the consumer to disclose any information that an "omniscient" insurer might consider material in underwriting risk, Stevens says. The "reasonable person test" focuses on what a reasonable person would understand that a prudent insurer would want to know.
Stevens says draft legislation including this change already exists, with Cabinet agreeing to such proposals in June 2007. The Insurance Contracts Bill containing these changes was scheduled to be introduced to the House in August 2008, she says. However, it has ended up on the back burner.
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