Providing complete and detailed information about your business can make a crucial difference to the payout you receive for a claim. It's also a legal obligation.

Under the Insurance Contracts Act the business seeking cover has a duty to provide full disclosure of any material information that could be relevant to the insurer's decision to offer a policy.

Examples of what is considered material information include but are not limited to

  • all business activities undertaken, including past operations
  • new companies, acquisitions or disposals
  • additional offices
  • new business activities with a higher degree of risk or liability
  • all claims and their circumstances, even if no payments were made
  • criminal convictions or regulatory investigations
  • a previously declined application, refusal to renew, imposed terms or restrictions in cover.

Insurers are legally protected if customers deliberately mislead them

The insurer uses the information you provide to assess the suitability of taking on your business risks and as a basis for applying terms and conditions, and setting a premium. Failure to disclose or misrepresentation of this information can have significant consequences if you need to make a claim.

If they are able to prove you have withheld or distorted the information provided, the insurer would be within their rights to

  • reduce the amount of the payout claimed
  • increase the cost of the premium
  • cancel their contract with you
  • reject the claim outright

If you have failed to disclose material information deliberately in order to reduce premiums or for fear that cover might otherwise not be provided, the insurer may void the contract completely.

An insurance company (the insurer) is entitled to void a contract if the client business is found to have failed to comply with the duty of disclosure requirement or made a false statement that is relevant the decision to accept the contract.

For example: a small supermarket owner might fail to inform his broker that he operated a laundry service at the same premises, instead claiming the washing and drying machines were for his own use.

Under these circumstances if one of the dryers caused a fire that damaged the supermarket the insurer could reduce or decline the claim on the basis of non-disclosure.

Similarly if a commercial property owner did not update their broker on the tenants in their commercial property and signed a lease for a tattoo parlour to operate from the premises, and then the tattoo parlour was broken into causing damage to the building, this non-disclosure could also lead to an insurer reducing or declining a claim.

This is because cover for a tattoo parlour is not insurance that all insurers will consider.

How working with a broker can help avoid non-disclosure issues and penalties

One of the advantages of working with an insurance broker is that they will probe you for material information about your risks and these prompts can help ensure that that important factors, such as working with particular types of materials, aren't overlooked.

This information gathering also helps the broker understand which insurers are most likely to provide cover — and in complex cases they may approach several insurers to achieve the full capacity of cover for your business and spread the risks so that no single insurer is overexposed.

In terms of being able to receive a full payout on your claim, it's essential to keep your broker informed of changes to your business. Your broker will be aware if these developments have an impact on your risk profile and the level of cover required to keep pace and provide continuous protection.

How Gallagher can help

Involving an insurance broker who understands your industry sector and the risks that are particular to your business can help you to proactively respond to insurer risk management concerns and also potentially provide access to more comprehensive cover on more competitive terms.

Industry research has also found that the degree of broker involvement correlates positively with client satisfaction with claims outcomes: having insurance industry guidance and input is more likely to secure cover that responds to your business's needs. We're here to help. Talk to one of our insurance experts.


Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient's industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers' control.

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