Giving wrong information to an insurer: misrepresentation

When you buy, renew or change an insurance policy, the law requires you to take reasonable care not to give the insurer a wrong answer. That duty is set out in the Consumer Insurance (Disclosure and Representations) Act 2012, which states plainly: "It is the duty of the consumer to take reasonable care not to make a misrepresentation to the insurer"¹. You do not have to volunteer anything the insurer has not asked about, but the answers you do give to its questions must be accurate to the standard of a reasonable person in your position.

What happens if an answer turns out to be wrong depends on two things: whether you took reasonable care, and whether the wrong answer made a difference to the insurer. A careless mistake leads to a proportionate response, such as paying part of a claim or applying different terms. A deliberate or reckless misrepresentation allows the insurer to treat the policy as if it never existed, refuse all claims and keep the premiums¹. The insurer, not you, has to prove that a misrepresentation was deliberate or reckless¹.

What counts as misrepresentation to an insurer

A misrepresentation is simply an answer to an insurer that is untrue or misleading. But the law does not give the insurer a remedy for every wrong answer. The Act calls a misrepresentation for which the insurer has a remedy a "qualifying misrepresentation"⁴, and the FCA's rulebook defines it in two parts: the consumer made the misrepresentation in breach of the duty to take reasonable care, and the insurer shows that without it, the insurer would not have entered into the contract at all, or would have done so only on different terms⁵.

Both parts matter. If you took reasonable care, there is no qualifying misrepresentation, whatever the answer turned out to be worth to the insurer. And if the insurer would have offered the same cover on the same terms even with the correct answer, the wrong answer made no difference, so there is no remedy. The Act adds that a misrepresentation made dishonestly is always to be taken as showing a lack of reasonable care⁶.

The law also makes some presumptions in the consumer's favour. Unless the contrary is shown, a consumer is presumed to have had the knowledge of a reasonable consumer, and to have known that a matter the insurer asked a clear and specific question about was relevant to the insurer⁷. This means an insurer cannot easily argue that a consumer should have guessed the hidden significance of a question it never actually asked clearly.

In practice, misrepresentation disputes usually arise over application and renewal questions: medical conditions on travel or life policies, driving convictions on car insurance, the value of belongings on home insurance, or how a vehicle is used. The ombudsman's guidance for insurers lists the actions that follow: charging more for the policy where there has been no claim, applying a restriction retrospectively, settling a claim proportionately, or avoiding the policy altogether².

What you do not have to tell an insurer

The old law, before 2012, required consumers to volunteer every "material" fact, whether asked or not. The 2012 Act replaced that with a duty only to answer the insurer's questions with reasonable care. The ombudsman sets out what does not have to be disclosed even where a question touches on it²:

• something you do not know, or could not reasonably be expected to know
• something the insurer should reasonably be expected to know
• information the insurer has waived, for example by saying it does not need it
• information that reduces the risk
• information covered by the Rehabilitation of Offenders Act 1974, meaning spent convictions

This list is important because insurers sometimes refuse claims on the basis of facts the customer had no realistic way of knowing, or that the insurer's own records already showed. The ombudsman's approach to underinsurance complaints makes the same point from the other direction: where the insurer's questions or guidance were unclear, reducing a claim payment, voiding the policy or adjusting the claim in other ways may not be fair⁸.

The burden of framing clear questions sits with the insurer. If a question is vague or ambiguous, and you gave an answer that a reasonable person could have given, the ombudsman is unlikely to find that you failed to take reasonable care. If you are unsure what a question means, asking the insurer or the broker in writing, and keeping the reply, is the safest course.

Changes during the policy: the protection is weaker

The duty to take reasonable care applies when a policy is entered into, renewed or varied. The ombudsman's guidance is that if something changes after the policy has started, you will usually not have to tell the insurer about it until you renew². A new medical diagnosis, a change of job or a house move generally does not have to be reported mid-term under the Act.

There are two important qualifications. First, some policies impose their own duty to report changes during the policy, and those terms are separate from the Act. Travel insurance is the clearest example: Which? reports that insurers must be told of changes after buying a policy, including new medical conditions, changes to medication, amended travel dates, different accommodation or extra travellers, or a claim could be rejected even if the issue seems unrelated⁹. Check your policy wording for a "change in circumstances" clause.

Second, the legal protection is weaker for mid-term disclosures. The House of Commons Library notes that policyholders are not protected by the Act for mid-term information disclosures, so insurers may reject a claim even if the policyholder took reasonable care¹⁰. This means a voluntary disclosure made during the policy, or an answer to a mid-term question from the insurer, is judged on less favourable terms than an answer given at application or renewal.

If your policy is coming up for renewal, that is the point at which changes need to be reflected in your answers. The dedicated page on changes you must tell your insurer about mid-policy covers the policy terms that apply between renewals.

Careless or deliberate: why the difference matters

The Act splits every qualifying misrepresentation into two categories: deliberate or reckless, or careless¹¹. The distinction decides everything that follows, from whether the claim is paid in part to whether the premiums are refunded.

The statutory test for deliberate or reckless has two limbs, and both must be met. The consumer either knew the answer was untrue or misleading, or did not care whether it was; and either knew the matter was relevant to the insurer, or did not care whether it was relevant¹¹. Anything that fails that test is careless: the Act defines a careless misrepresentation simply as one that is not deliberate or reckless¹¹.

Crucially, it is for the insurer to show that a misrepresentation was deliberate or reckless⁶. An insurer cannot simply assert that you must have known; it has to evidence what you knew or did not care about. The ombudsman's guidance for businesses reflects this: where the misrepresentation was careless, the insurer's response should be based on what it would have done if the consumer had given the correct answer².

The two-category structure replaced an older industry approach. The Law Commission and Scottish Law Commission, whose work led to the Act, described the ABI Code of Practice as dividing misrepresentations into three categories, "innocent", "negligent" or "deliberate or without any care", with the innocent category paying the claim in full¹². The Act as passed folded the innocent category into the reasonable care test: if you took reasonable care, there is no qualifying misrepresentation at all and the claim stands.

The FCA's rulebook also requires firms to explain this to customers: a firm should explain the responsibility to take reasonable care not to make a misrepresentation, and the possible consequences of careless, reckless or deliberate misrepresentation¹³. So the consequences should not come as a surprise buried in the small print; they should have been set out when the policy was sold.

What an insurer can do if you gave wrong information

Once an insurer establishes a qualifying misrepresentation, its remedies depend on what it would have done with the correct information¹⁴. The ombudsman summarises the range of responses as charging more for the policy where there has been no claim, applying a restriction retrospectively, settling a claim proportionately, or avoiding the policy².

For a careless misrepresentation, the Act sets out three scenarios, and each carries its own remedy³:

The "different terms" remedy can matter a great deal. If the insurer would have applied an exclusion, a lower limit or a condition, it can retrospectively apply that term to the policy, which may mean a claim falls outside the cover entirely even though the policy was never cancelled.

For a deliberate or reckless misrepresentation, the remedies are much harsher: the insurer may avoid the contract, refuse all claims, and need not return any of the premiums paid, except to the extent that it would be unfair to the consumer to retain them³. The ombudsman's guidance to insurers puts the same point in plainer terms: if the misrepresentation was deliberate or reckless the insurer can avoid the policy and keep the premium, and refuse an ongoing claim².

A real example shows how this works in practice. Benjamin's motor insurer cancelled his policy and turned down his claim after discovering he had not mentioned a driving conviction. The ombudsman was satisfied this was a qualifying misrepresentation and that it was deliberate, so the insurer was entitled to void the policy, refuse the claim and did not have to return the premium¹⁵. Had Benjamin's answer been careless instead, the outcome would have turned on whether his insurer would have covered him at all, on different terms, or at a higher price.

Proportionate settlement: paying part of a claim

Where a careless misrepresentation means the premium should have been higher, the insurer may reduce the claim payment in the same proportion. The ombudsman's worked example: if the customer paid a £100 premium but should have paid £150, they paid two-thirds of the premium, so two-thirds of the claim should be paid². The same principle applies where the insurer would have charged more and altered the terms: if it would have applied a £10,000 valuables limit and charged double the premium, it might be fair to apply the £10,000 limit and pay £5,000².

The ombudsman applies this approach in real cases. In one motor insurance complaint, a policyholder had not disclosed speeding convictions; the firm agreed and paid Mrs A 85% of the value of her claim on a proportional basis¹⁶. In a home insurance case, Bryan's insurer accepted his fire claim but settled it proportionately, so he received only part of the maximum £100,000 sum insured¹⁷.

The ombudsman's underinsurance guidance gives the same arithmetic from the consumer's side: if a consumer paid £400 but should have paid £500, they have paid 80% of the premium, so it is fair for them to receive 80% of the claim value⁸. And where the insurer would still have insured the consumer at the same premium, the ombudsman is unlikely to find it fair for the insurer to reduce or decline the claim at all⁸.

Proportionate settlement is not limited to premium differences. In travel insurance complaints, where the customer would have bought the policy but paid extra for an optional cover, the ombudsman may tell the insurer to pay the claim with interest, minus the additional premium¹⁸. The common thread is that the consumer should be put in the position they would have been in with the correct answers, no better and no worse.

If a claim is reduced and you believe the insurer's arithmetic or its view of what it would have done is wrong, that is a matter for a complaint. The ombudsman looks at whether the questions were clear and specific, whether the information given was accurate, whether the insurer would have done anything differently with accurate information, and whether the insurer has been fair in how it handled the misrepresentation¹⁴.

When an insurer avoids your policy

Avoidance is the most serious remedy: the insurer treats the contract as if it never existed and refuses all claims under it. For a deliberate or reckless misrepresentation, the Act allows exactly that, with no refund of premiums except where keeping them would be unfair³. For a careless misrepresentation where the insurer would not have covered you on any terms, the insurer may avoid the contract and refuse claims but must return the premiums paid¹.

The ombudsman's guidance adds a timing rule: when a policy is avoided, it is cancelled from the date the misrepresentation occurred, whether that was the start of the policy, a later renewal, or mid-term². The insurer must also refund the customer's premiums back to the date of avoidance in the cases where a refund is due².

Avoidance is not automatic, and the ombudsman does not rubber-stamp it. In two home insurance cases it has published, one involving undervalued jewellery after a burglary and another involving unspecified valuable items, the ombudsman decided the insurers had acted fairly in avoiding the policies and not paying the claims¹⁴. But in an older case, an insurer avoided an entire policy after a forged receipt; the ombudsman upheld the complaint, finding the fair solution was to reinstate the policy and pay the claim¹⁹. The lesson is that the response has to fit what went wrong: a wrong answer about one matter does not necessarily justify refusing a claim about something unrelated.

For life insurance, the stakes are particularly high. Which?'s guidance on life insurance notes that if you lie about your smoking and get a cheaper premium as a result, you will have committed fraud, and your policy may be declared void and any payout refused when your family claims²⁰. The same guidance makes the positive point that as long as you make full and honest disclosures on your application and continue paying the premiums, the policy cannot be cancelled²⁰.

The law also gives life insurance special protection in one situation: where a careless misrepresentation does not relate to an outstanding claim, the insurer may not terminate the contract if it is wholly or mainly one of life insurance³. This reflects the fact that a life policy cannot simply be replaced years later, when health may have changed.

Renewals and policies that carried on

A wrong answer at the start of a policy does not poison every renewal that follows. The ombudsman's guidance is that the insurer can only avoid later contracts if the customer misrepresented again at the later renewals and that would have made a difference². So if you gave a wrong answer when the policy began, answered the renewal questions accurately, and the insurer renewed, the renewed contract stands on its own footing.

The ombudsman also takes a firm line on insurers that discover a problem and carry on regardless. Its view is that if the insurer carries on with the contract, it has essentially affirmed it and has waived the right to later retrospectively amend the terms². An insurer that knows about a misrepresentation, keeps taking the premiums and keeps the policy running cannot then rely on the old wrong answer to refuse a claim years later.

The consumer-facing version of the same rule states that the insurer can only avoid later contracts if you misrepresented again at the later renewals and this would have made a difference to the insurer²¹. Renewal is also the point at which the duty of reasonable care applies afresh: the ombudsman notes that when a customer buys or renews a policy, the customer needs to "take reasonable care not to make a misrepresentation"².

Renewal disputes can also run the other way, where the insurer's own information is at fault rather than the customer's. In one case the ombudsman found the information in the renewal notices was misleading, and felt that by the fourth renewal and the customer's fifth policy it should have been clear he was not engaging with his insurance²². If a renewal notice misstates your cover, your answers or your premium, that is a complaint in its own right, and the page on insurance renewals covers the rules insurers must follow at renewal.

Complaining about a misrepresentation decision: eight weeks, then the ombudsman

If an insurer refuses or reduces a claim, cancels your policy or demands more premium because of an alleged misrepresentation, complain to the insurer first. The ombudsman's guidance for consumers is plain: talk to your insurance company first, because they need to have the chance to put things right²³.

The insurer should reply to your complaint within eight weeks². If it does not reply within the time limits, or you disagree with its response, you can bring the complaint to the Financial Ombudsman Service². The service is free to use, and after eight weeks you have the right to escalate regardless of whether the insurer has finished its investigation.

When it looks at a misrepresentation complaint, the ombudsman weighs four things¹⁴:

1. whether the questions the insurer asked were clear and specific
2. whether the information the consumer gave was accurate
3. whether the insurer would have done anything differently if it had been given accurate information
4. whether the insurer has been fair in the way it has handled the misrepresentation

That fourth factor means the ombudsman can look beyond the strict legal remedy. An insurer that takes an extreme response to a minor careless mistake, or that fails to follow its own claims process, may be found to have handled the matter unfairly even where some remedy was justified.

Complaints do not always succeed, and it is worth knowing that. In one case a customer complained that a personal accident policy had been mis-sold with misleading information; the insurer did not uphold the complaint, saying the information provided was clear and not misleading and the policy had not been mis-sold²⁴. The ombudsman weighs the evidence on both sides rather than assuming the consumer is right.

If the ombudsman upholds your complaint, it can tell the insurer to pay the claim in full, pay it proportionately, reinstate the policy, refund premiums, or pay compensation for distress and inconvenience. The page on complaining about an insurer sets out the process step by step, and the page on rejected claims covers the other common reasons claims are refused.