A cyber insurance provider can deny a claim if you've given the wrong answer on your application

Posted February 7th, 2019 in cyber insurance, Data Breaches, Edmund

As organisations have become increasingly dependent on technology to do business, cyber insurance has developed into one of the most important types of coverage for today's businesses to carry.

Yet, cyber insurance is also one of the least understood types of cover on the market.

This series will help clear up any misunderstandings you might have about cyber insurance and how it can protect your business.

True or false?

A cyber insurance provider can deny a claim if you've given the wrong answer on your application

FALSE - When you buy an insurance policy, your premium is calculated on the information you share with your insurance provider.

And it goes without saying, that you’re expected to answer all of the questions as honestly and accurately as possible.

If not, your insurance provider is permitted by law to cancel the policy, or reduce the amount that will be paid if you make a claim, or both.

However, the law also applies restrictions to the circumstances in which such action can be taken. The Insurance Contracts Act 1984 stipulates that "a contract of insurance is based on the Duty of Utmost of Good Faith".

So what does it all mean?

Well, the law dictates that when a customer and the insurer enter into a contract, they promise to be fair and honest in the way they deal with each other.

Furthermore, you're required to tell the insurer everything that you know, or could reasonably be expected to know, which may affect their decision to insure you and on what terms.

If you’re unsure of your specific obligations when applying for cyber insurance with us, you can ask for our advice on your Duty of Disclosure

The expectation is that you are honest and accurate with your insurer to avoid cancellation of your policy at a later stage. 

Key Takeaways
  1. Whilst you have legal obligations, so does the insurer.

  2. The insurer can reduce the amount of your claim if you fail to comply with the Duty of Disclosure or made a misrepresentation. However, this does not apply where the insurer would have entered into the contract for the same premium and on the same terms and conditions, even if you had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into.

  3. The insurer can decline your claim and/or cancel your policy from its start date and avoid the contract. But only if you provided incomplete and inaccurate information fraudulently

  4. You can make a complaint against the insurer if you are not satisfied with how your claim is handled. Seek out the insurer’s Complaints Policy. 

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