QUESTION:
We are finding that frequently insurers are using the ICR when underwriting new house insurance risks. We have come across a number of instances when a client is purchasing a home and the underwriter requests information in regards to claims the previous home owner has lodged. They will not give any information about the claims as they say this is a breach of the privacy act.
As this information is not readily available to the public, the purchaser finds themselves in a position of having to request this information from the vendor, more often than not via a solicitor, and in many cases the sales and purchase agreement has already been signed.
In all cases, we have had the claims were relatively minor, and all the damage had been repaired and claims closed, therefore despite having property inspections completed and Lim Reports checked, our clients had no indication that the claims had occurred. This is just adding additional delays and costs to our customers.
My understanding of the ICR was that it was designed to prevent fraud and purposeful non-disclosure.
Should insurers be able to use the ICR as an underwriting tool for this purpose?
I believe that vendors already have a duty to disclose relevant information to the buyer.
Are the vendor's old claims on the property relevant if there is no unrepaired damage or risk of the event reoccurring?
Do insurers now expect that our clients should be asking their real estate agents for a copy of the previous owners' claims history before signing the sales and purchase agreement?
EXPERT ANSWER: Crossley Gates, Glaistor Keegan
Your understanding of the purposes for which the ICR was set up is correct. The practice you refer to was not one of those purposes.
It is not clear to me why the purchaser's insurer needs to know about the previous claims (if any) by the vendor in relation to the house being sold. This does not assist with an assessment of the purchaser's moral hazard. In relation to the physical hazard, the insurer is free to inspect the home if it wishes to. In any event, the purchaser is not in a position to easily access this information for good privacy reasons. Therefore, the request seems to be unreasonable.
Only the vendor or the vendor's insurer can easily access that information. The purchaser is in no better position to request this information via the vendor than the purchaser's insurer is by making the same request of the vendor.
