Renew a Policy
Many insurance policies are renewed from year to year. Insurers must, under the Commonwealth legislation, give 14 days notice of the expiry of the policy. If they don’t, insurance cover continues at no cost to the policy holder unless and until a claim arises. Then, the policy holder will only have to pay the premium as and from the date of the claim.
No Claim Bonus and Excess
When making a claim, the insured should consider the effect it might have on their no-claim discount or excess. The no-claim discount began in motor car insurance as an attempt to reduce premium rates for drivers with accident free records, but it has now spread to house and contents insurance. The no-claim discount provides a powerful reason for not making a claim unless the loss has been a major one.
Make a Claim
A claim is usually made by writing to, calling on, or phoning the insurer, depending on the policy. The insurer should be notified of a claim as soon as possible. The policy usually gives a time limit for making claims which is sometimes quite short. If the insurer’s rights have been prejudiced by the insured’s failure to notify them of the claim, the insurer may be able to refuse to pay.
The insurer must prove that a condition in the policy has been breached if it is to refuse to pay. However, in the case of some exclusions (for example, if the policy states that the insurer doesn’t have to pay if a car was being driven by an unlicensed driver) it is for the insured to show that they have a defence to the exclusion.
Most policies have a condition that the insured will not litigate, negotiate, pay, settle or admit any claim that is made against the insured person.
An insurer must pay under a policy even though the insured may have a perfectly valid action against a third party, for example, if the damage was clearly caused by the negligence of another driver. It is up to the insurer to pursue the claim against this third party.
Once an insurer has paid a claim to the insured, the insurer ‘steps into the shoes’ of the insured, and can take any court action that the insured may have been able to take against third parties. This is called subrogation.
It is an implied term in all policies that the insured will cooperate with the insurer in bringing actions against a third party, and will lend their name to the case. It is also an implied term that the insured will do nothing to prejudice the subrogation rights of the insurer (that is, that they will not admit liability or sign a release in favour of third parties). A release is a document by which the insured agrees not to sue another, normally in consideration for that other person agreeing to pay a certain sum in settlement of a claim. If an insured person breaches these terms, they are liable to the insurer for any damages the insurer suffers as a result.
Cancel a Policy
There are only limited circumstances in which a policy of insurance can be cancelled under the Insurance Contracts Act. They include:
- failure by the insured to comply with the duty of utmost good faith or the duty of disclosure (see above);
- breaking a condition of the contract by the insured;
- a fraudulent claim made by the insured (see above).
In exercising the right of cancellation, the insurer must give, in the case of general insurance, no less than three business days notice, or in the case of life insurance, no less than 20 business days notice. On cancellation, it is usual for the insurer to refund any premium for the unexpired period of insurance.