Answering an insurer's questions honestly: non-disclosure and claims

When you apply for life insurance, the insurer asks questions about your health, lifestyle and family history, and prices the policy on the strength of your answers. If an answer turns out to be wrong, the insurer may react when a claim is made, and in the worst case it can refuse to pay anything. But the law that governs this, the Consumer Insurance (Disclosure and Representations) Act 2012 (often shortened to CIDRA), is much more forgiving than many people expect. It does not ask you to be perfect, only to take reasonable care, and it forces the insurer's response to match the seriousness of the mistake¹.

The Act replaced an older and much harsher rule. Before 2012, consumers had a duty to volunteer anything a prudent insurer might consider relevant, even if it was never asked about, and insurers could treat the application as the "basis of the contract", meaning any inaccuracy, however small, could void the policy. The Law Commission of England and Wales and the Scottish Law Commission recommended changing this in a joint report and draft Bill published in December 2009, and the Act that followed replaces the duty to volunteer information with a duty to take reasonable care to answer the insurer's questions fully and accurately².

In practice, that means the questions decide what you have to disclose. If you answered them honestly and to the best of your knowledge, the insurer generally has to pay. If you were careless, its remedy has to be proportionate to what it would have done with the right answer. Only if you were deliberate or reckless can it tear up the policy and keep your premiums, and it is the insurer that has to prove that¹.

You answer the insurer's questions; you do not have to volunteer everything

The starting point of the Act is simple and it is worth knowing exactly what it says:

That is the whole of the duty, and it applies before a consumer insurance contract is entered into or varied¹. There is no separate duty to volunteer facts the insurer never asked about. The Law Commissions' 2009 report, which led to the Act, described the change as abolishing the consumer duty to volunteer information and replacing it with a duty to take reasonable care to answer the insurer's questions fully and accurately².

This matters most for people who worry that a life insurer will use something against them that was never raised at application. The Financial Ombudsman Service defines non-disclosure as relevant information you were asked about when you took out a policy being left out⁸. If the question was never asked, the Act's duty is not engaged in the same way. The ombudsman also notes that if something changes after the policy has started, you will not usually have to tell the insurer about it until you renew the policy⁹. For a life insurance policy, which often runs for decades without a fresh application, that means a diagnosis made after the policy started generally does not have to be reported at all. Independent guidance confirms this for specific conditions: someone who already has life insurance and is later diagnosed with diabetes does not have to tell their insurer or pay higher premiums¹⁰.

The questions themselves still matter enormously, because they set the scope of what you must get right. You must tell a life insurer if you smoke or vape using nicotine products, even if only occasionally, because that is a direct question on almost every application¹⁰. The ombudsman's approach to a wrong answer is also measured: it has said it is not for the ombudsman to tell an insurer what price to charge for covering a particular risk, or how to assess and value that risk¹¹. What the ombudsman can test is whether the insurer asked a clear question, whether you took reasonable care answering it, and whether the insurer's reaction fits the mistake.

Taking reasonable care to answer fully and accurately

"Reasonable care" is not a standard of perfection. The ombudsman explains that if an insurer asks a clear question when the policy is sold or renewed, you have a duty to take reasonable care not to make a misrepresentation¹². The test is what a reasonable person in your position would have understood the question to mean and how carefully they would have answered it. A vague or ambiguous question is harder for an insurer to rely on than a precise one.

The ombudsman's guidance for insurers sets out things that do not count against you. Information need not be disclosed if it is something you do not know or could not reasonably have been expected to know, something the insurer should reasonably be expected to know itself, information the insurer has waived, information that would reduce the risk, or information covered by the Rehabilitation of Offenders Act 1974⁹. So a condition you were never told you had, or a spent conviction, is not a trap waiting for a claim.

The Financial Conduct Authority's rules reinforce this from the insurer's side. Its insurance conduct guidance says a firm should explain to consumers their responsibility to take reasonable care not to make a misrepresentation, and the possible consequences of careless, reckless or deliberate misrepresentation¹³. Insurers also have an obligation to handle all claims promptly and fairly, to update you on a claim's progress, and not to reject a claim unreasonably¹⁴.

If you took reasonable care, the ombudsman's insight on underinsurance and misrepresentation is blunt about the outcome: there is unlikely to have been a qualifying misrepresentation at all, and the insurer would have no remedies under the Act, meaning it would have to pay the claim in line with the policy terms¹⁵. The whole structure of the law is aimed at distinguishing between honest effort, carelessness and dishonesty, and reasonable care is the line that protects the honest.

Three kinds of wrong answer and what each one means

The Act sorts wrong answers into categories, and the category decides what the insurer can do. A "qualifying misrepresentation" is one made before the contract was entered into or varied, made in breach of the duty of reasonable care, where 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 terms¹⁶. Once a misrepresentation qualifies, the Act says it is either deliberate or reckless, or careless¹⁷.

The categories work like this:

• Reasonable care taken. No qualifying misrepresentation, no remedy, and the claim is paid under the policy terms¹⁵.
• Careless. The insurer's response should be based on what it would have done if you had given the correct answer⁹. Depending on that answer, it may charge more for the policy where there has been no claim, retrospectively apply a restriction, settle a claim proportionately, or avoid the policy⁹.
• Deliberate or reckless. The insurer may avoid the policy, refuse all claims and keep the premium⁹.

The insurer's remedies for a careless answer are anchored to what it would have done if you had complied with the duty of reasonable care⁵. That is the Act's central idea: the punishment fits the mistake, and an insurer cannot use a minor inaccuracy to escape a major claim it would have paid anyway.

Deliberate or reckless misrepresentation: the insurer can refuse all claims

The Act sets out a two-part test for the most serious category. A qualifying misrepresentation is deliberate or reckless if you knew it was untrue or misleading, or did not care whether it was, and you knew the matter it related to was relevant to the insurer, or did not care whether it was¹⁸. Both limbs matter: it is not enough that the answer was wrong, the insurer must show the state of mind behind it.

Crucially, the Act puts the burden where it belongs:

The insurer, not you, has to prove the serious category¹. A misrepresentation made dishonestly is always taken as showing a lack of reasonable care³, which pushes it out of the "reasonable care" category, but the insurer still has to establish deliberateness or recklessness to keep the premiums.

The consequences of that category are severe. If a qualifying misrepresentation was deliberate or reckless, the insurer may avoid the contract and refuse all claims, and need not return any of the premiums paid, except to the extent that it would be unfair to you for it to retain them⁵. The ombudsman describes the same outcome: if the misrepresentation was deliberate or reckless the insurer can avoid the policy and keep the premium, and if there is an ongoing claim it can refuse it⁹.

The ombudsman publishes case studies showing how this works in practice. In one, a customer known as Benjamin had answered "no" to a motor insurance question about whether he or any named driver had been refused insurance or had a policy voided, when in fact a previous policy had been cancelled after a non-disclosure investigation. The ombudsman was satisfied this was a qualifying misrepresentation and that it was deliberate, so the insurer was entitled to void the policy, refuse his claim and keep the premium¹⁹. Independent guidance on life insurance gives the same warning in plainer terms: 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 claims¹⁰.

Careless mistakes get a proportionate remedy, not automatic cancellation

Most wrong answers are not lies. They are misread questions, forgotten consultations, or honest confusion about what "counts". For these, the Act builds the insurer's remedy around what it would have done with the truth, and the ombudsman's guidance sets out the range of responses: the insurer may want to charge more for the policy where there has been no claim, retrospectively apply a restriction, settle a claim proportionately, or avoid the policy⁹.

The proportionate settlement is the remedy most people encounter. The ombudsman's insight explains that one of the remedies available for a careless, and therefore qualifying, misrepresentation is that where the insurer would have charged a higher premium if the issue had been disclosed, it can settle a claim proportionately¹⁵. The Act says the same in statutory language: where the insurer would have entered into the contract but would have charged a higher premium, the insurer may reduce proportionately the amount to be paid on a claim³. In practice that means a claim is reduced by roughly the fraction the extra premium would have represented, rather than refused outright.

The other careless scenarios follow the same logic:

• Different terms. If the insurer would have entered into the contract but on different terms, excluding terms relating to the premium, the contract is to be treated as if it had been entered into on those different terms if the insurer so requires⁵.
• No cover on any terms. If the insurer would not have entered into the contract at all, it may avoid the contract and refuse all claims, but it must return the premiums paid⁴.

The difference between the last of those and the deliberate category is the premiums. A careless mistake that meant the insurer would never have covered you still ends the policy, but you get your money back⁴. A deliberate or reckless answer can cost you both the cover and the premiums⁵.

The ombudsman applies this proportionality even where the insurer's first instinct is harsher. Its travel insurance guidance on a change in health describes its approach: if the insurer would have covered the condition for an additional premium, the ombudsman will generally consider it fair for the insurer to pay the claim, minus any additional premium which would have been charged¹². That is the proportionate remedy in action.

Life insurance cannot be ended for a careless mistake

One protection in the Act is aimed squarely at long-term life policies. 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 insurance⁶. The same restriction appears in the Act's Schedule 1⁵.

This is what answers one of the most common fears about life insurance: that an insurer will find a small error years into the policy and cancel it, leaving your family without cover after years of premiums. For a careless mistake unconnected to a claim, on a policy that is wholly or mainly life insurance, the Act removes that option. The insurer's remedies are limited to the ones tied to what it would have done with the right answer, such as treating the policy as if it had been entered into on different terms.

The protection has edges, and it is worth being clear about them. It applies to careless misrepresentations, not deliberate or reckless ones, where the insurer can still avoid the policy⁵. And it applies where there is no outstanding claim; a claim being made changes the picture, because the insurer's remedy then attaches to that claim. Independent guidance also underlines what keeps a life policy safe in the first place: as long as you make full and honest disclosures on your application and continue paying the premiums, the policy cannot be cancelled, and once a policy is in place the premiums cannot be increased after a diagnosis such as cancer¹⁰.

The old all-or-nothing rules were abolished for consumers

Before 2012, the rules came from the Marine Insurance Act 1906, a statute written for commercial shipping. Its section 18 imposed a duty on the policyholder to disclose every material circumstance, and the Law Commissions' report noted that under it, if the assured fails to make such disclosure, the insurer may avoid the contract². Section 20 went further by letting insurers rely on "basis of the contract" clauses, which deemed the applicant's answers representations of fact and made any inaccuracy a ground to void the policy, whatever its significance and whatever the applicant's state of mind.

The Consumer Insurance (Disclosure and Representations) Act 2012 swept this away for consumers. It abolishes any rule of law to the same effect as sections 18, 19 and 20 of the Marine Insurance Act 1906 in relation to consumer insurance contracts⁷. The industry had already moved part of the way: the Association of British Insurers issued formal written guidance on non-disclosure in protection insurance in January 2008, in response to public concern, and its Code of Practice on managing claims divided misrepresentations into three categories, innocent, negligent, or deliberate or without any care, with innocent meaning the claim is paid in full, negligent meaning a proportionate remedy, and deliberate or without care meaning the insurer may refuse all claims². The Act turned that graded approach into law.

The change was not accidental or narrow. A House of Lords committee reviewing the financial services exclusion noted that the ABI and BIBA joint Code of Practice did not encompass the health, travel and life insurance products that witnesses said posed a particular problem for some customers²⁰. The Act closed that gap by applying to all consumer insurance contracts, life insurance included.

The policy wording cannot override the Act

Because the Act abolishes the old rules rather than merely supplementing them, a policy cannot contract out of it. The Law Commissions' draft Bill stated plainly that no contracting out is permitted², and the Act gives effect to that approach by abolishing the underlying rules of law for consumer insurance contracts⁷.

In practical terms, this means a clause in a life insurance policy saying your answers "form the basis of the contract", or that any inaccuracy voids the cover, has no effect on a consumer policy. The insurer's remedies are those the Act provides, no more. It must show a qualifying misrepresentation, classify it as careless or as deliberate or reckless, and apply the remedy the Act attaches to that category¹⁷.

The FCA's rules support the same conclusion from the conduct side. Its insurance conduct rules define a qualifying misrepresentation by reference to the Act's own duty and the insurer's counterfactual test: one made in breach of the duty in section 2(2), where the insurer shows that without the misrepresentation it would not have entered into the contract at all, or would have done so only on different terms¹⁶. The regulatory definition and the statutory one point at each other, leaving no room for a policy's small print to widen the insurer's powers.

Where these rules stop

The Act applies to consumer insurance contracts, and its protections stop at that boundary. Insurance bought for a business is not a consumer insurance contract, so the older disclosure rules, including the duty to volunteer material information and the basis-of-contract doctrine, can still apply to commercial policies. If you buy insurance in a business name or for business purposes, do not assume the reasonable care standard protects you.

There are other edges within consumer insurance. The ombudsman's guidance notes that customers are not usually required to disclose changes after the policy starts until renewal⁹, but a parliamentary research briefing on the Act flags a gap: policyholders are not protected by the Act for mid-term information disclosures, so insurers may reject a claim even if the policyholder took reasonable care, in the case of mid-term disclosures²¹. Mid-term disclosures are things you tell the insurer during the policy term, for example when adding cover or changing details, rather than at application or renewal. The briefing also summarises the Act's overall shape: customers must take reasonable care not to make misrepresentations when taking out or renewing a policy, and if they do not, insurers may be allowed to void policies and refuse claims or alter the terms of a policy²¹.

Some insurance types carry their own disclosure duties outside the application. For motor insurance, official guidance in Northern Ireland is that you must report an accident to your insurer even if you are not intending to make a claim²², and a government consumer guide warns that if you fail to disclose a vehicle's total loss history, your insurer can reject any claim you may make on the grounds of non-disclosure²³. These are separate from the Act's application-stage duty, but they show that honesty obligations in insurance are not confined to the application form.

Finally, the Act is about misrepresentation, not about every reason a claim can fail. Claims can still be refused for exclusions in the policy, for not meeting its definitions, or because the policy was never the right type in the first place. In one ombudsman case study, a customer called Lisa discovered that what she thought was life insurance was actually personal accident insurance, and when she complained, the insurer did not uphold it, saying the information provided was clear and not misleading and the policy had not been mis-sold²⁴. The ombudsman also notes that for personal accident insurance the seller does not have to make sure the policy is suitable for the customer's specific needs, though the customer must be given enough information, clear, fair and not misleading, to make an informed choice²⁵.

No five-year cut-off for challenging a life insurance claim

Some countries operate a "non-contestability" period: after a set number of years, the insurer can no longer investigate the application. The UK does not. The Law Commissions considered a five-year non-contestability cut-off for consumer life insurance and decided against including it in the draft Bill, noting that although some insurers may decide to offer a five-year cut-off period to reassure consumers, they did not think it should be a legal requirement².

The practical consequence is that a life insurer can look back at the application answers when a claim is made, however long ago the policy started. What protects the policyholder is not time but the standard of care: if you took reasonable care, there is unlikely to have been a qualifying misrepresentation and the insurer has no remedy¹⁵. And for a careless mistake on a life policy, the insurer's response is capped at the proportionate remedies, with termination for a non-claim-related careless mistake ruled out for wholly or mainly life insurance contracts⁶.

If a claim is reduced or turned down

If an insurer reduces or refuses a claim because of something said on the application, its decision has to fit the Act's structure, and you can test it. The first question is whether the answer was wrong at all, and whether the question was clear enough that a reasonable person would have understood it¹². The second is what the insurer would have done with the correct answer, because that sets the ceiling on its remedy⁹. The third is whether the insurer has actually shown the answer was deliberate or reckless, which is its burden, not yours¹.

If you disagree with the decision, complain to the insurer first. Insurers have an obligation to handle all claims promptly and fairly, to update you on a claim's progress, and not to reject a claim unreasonably¹⁴. If the insurer upholds its own decision, you can take the complaint to the Financial Ombudsman Service, which looks at misrepresentation and non-disclosure complaints and can award compensation if it finds the insurer acted unfairly⁸. The ombudsman's published guidance and case studies show it testing insurers on exactly these points: whether the question was clear, whether the customer took reasonable care, and whether the remedy matches what the insurer would have done with the truth¹⁹.

For wider background on how these policies work, see how life insurance works, applying for cover: medical questions, underwriting and GP reports, getting cover with a pre-existing medical condition and claiming on a life insurance policy after someone dies.