IFSO Case Study
The declined claim

In June 2023, Graham’s* vehicle broke down on the motorway and was then hit from behind by another vehicle. 

Graham made a claim to his insurer, but the insurer declined the claim and avoided the policy because Graham had not told them he was using the vehicle for business purposes. 

However, because there had been delays in assessing Graham’s claim in the wake of the 2023 weather events, the insurer offered him a goodwill payment consisting of $1,597.19, which was the estimated cost of repairing the vehicle (less a $400 excess), and a $100 Prezzy card. 

The complaint

Graham complained to the Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) because he said that his business had lost money in the time it had taken the insurer to assess his claim. 

He said when he first made the claim, he told the insurer about the change in vehicle use, and accepted that this might mean his claim would be declined. He asked the insurer to get back to him quickly to confirm this, and refund his premiums paid since the change in vehicle use, so that he could get on with fixing his vehicle. 

However, because there was a delay in the insurer getting back to him after that point, Graham said they owed him compensation. 


The IFSO Scheme investigated Graham’s complaint. 

When Graham arranged the policy, the insurer asked him whether the vehicle was used for private, business or both, and he answered “private”. 

He told the insurer that he planned to use the vehicle for business purposes in the future, and the insurer advised him to contact them to update the policy when the vehicle use changed. 

In June 2022, Graham started using his vehicle for business purposes, but did not inform the insurer. 

Graham was sent renewal documents in January 2023 and was asked to tell the insurer if there was anything that might affect the policy that it did not already know about. The insurer advised him that if he did not do this, the policy might not be valid, and he might not be covered if he ever needed to make a claim. 

Graham did not tell the insurer that he had been using the vehicle for business purposes when the policy renewed in February 2023.

The law says that there is an obligation on an insured to disclose all material information when they arrange an insurance policy and at renewal of the policy. Graham’s insurer also had a policy provision that required him to notify them if there were any modifications to the vehicle, or any material increases or changes in the risk it covered. 

The case manager at the IFSO Scheme made enquiries with independent underwriters who confirmed that the change in vehicle use was material information, because they would have either loaded the policy premiums or insured under business cover, rather than private cover. As the underwriters would not have insured him on the same terms, the insurer was able to avoid the policy and declined to consider the claim. 

Under the policy, the insurer was required to refund Graham the premium payments he’d made since the vehicle use changed. However, in recognition of the delays in assessing Graham’s claim, the insurer offered Graham more than what the premium refunds would amount to - $1,597.19 together with a $100 prezzy card. This was the most Graham would have received had the insurer accepted his claim. 


The IFSO Scheme found the insurer had correctly applied the terms and conditions of the policy to the claim. 

The IFSO Scheme has no power to require insurers to make any payments outside the terms and conditions of the policy, which meant the insurer was not required to pay any compensation to Graham for delays in assessing his claim. 

The IFSO Scheme believed the insurer’s offer was fair and reasonable in all the circumstances.

The complaint was not upheld. 


March 2024

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