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Duty to take reasonable care

Improving customer confidence in insurance

About the changes

From 27 September 2021, applicants for life insurance (and indeed all types of ‘consumer insurance contracts’) will no longer be bound by a Duty of Disclosure. Instead, customers entering into a consumer insurance contract will have a duty ‘to take reasonable care not to make a misrepresentation’. 

The purpose of the original Duty of Disclosure was to protect customers in an insurance pool by ensuring that new customers entering the pool do so on the price and terms which accurately reflected their risk.

In assessing the current duty of disclosure, the Financial Services Royal Commission found the existing approach to disclosure is no longer relevant for modern consumer contracts of insurance. It was concluded that the duty does not recognise the breadth and depth of the gap between what a consumer knows and what an insurer knows is relevant.

Why these changes are necessary

The Financial Services Royal Commission concluded that the duty to take reasonable care not to make a misrepresentation to an insurer is more appropriate for consumer contracts of insurance and is substantially less complex than the current disclosure duty.

The new duty to take reasonable care places a greater obligation on insurers to collect the information they need, rather than requiring applicants to guess what information might be important to an insurer.

As such this is a positive development, which should strengthen customer - and adviser - confidence that insurers will honour their promise and be there when it matters most, claim time.

What you need to do

From a practical perspective, this change will be reflected in documents currently containing the Duty of Disclosure, including PDSs, application forms and underwriting questionnaires.

Wording that will be used for Duty to take reasonable care updates

When applying for insurance, there is a legal duty to take reasonable care not to make a misrepresentation to the insurer before the contract of insurance is entered into. To meet this duty, each person whose life is to be insured must also take reasonable care not to make such a misrepresentation.

A misrepresentation is a false answer, an answer that is only partially true, or an answer which does not fairly reflect the truth.

This duty also applies when extending or making changes to existing insurance, and reinstating insurance.

If you do not meet your duty

Not meeting your legal duty can have serious impacts on your insurance. Your cover could be avoided (treated as if it never existed), or its terms may be changed. This may also result in a claim being declined or a benefit being reduced.

Please note that there may be circumstances where we later investigate whether the information given to us was true. For example, we may do this when a claim is made.

About this application

When you apply for life insurance, we conduct a process called underwriting. It’s how we decide whether we can provide cover, and if so on what terms and at what cost.

We will ask questions we need to know the answers to. These will be about personal circumstances, such as health and medical history, occupation, income, lifestyle, pastimes, and current and past insurance of each life to be insured. The information given to us in response to our questions is vital to our decision.

When you apply for insurance benefits through a superannuation fund or ask to extend or make changes to existing insurance benefits, the fund trustee passes on your personal information to us.  You also therefore need to take reasonable care not to make a misrepresentation when providing this information to the fund trustee.

Guidance for answering our questions

You are responsible for the information provided to us. Each person answering our questions should:

  • think carefully about each question before answering. If you are unsure of the meaning of any question, please ask us before you respond
  • answer every question
  • answer truthfully, accurately and completely. If you are unsure about whether you should include information, please include it. Please don’t assume we will ask others such as your doctor
  • review your application carefully. If someone else helped prepare your application (for example, your adviser), please check every answer (and if necessary, make any corrections).

Changes before your cover starts

Before your cover starts, please tell us about any changes that mean you and each person who answered our questions would now answer differently. It could save time if you let us know about any changes as and when they happen. This is because any changes might require further assessment or investigation.

Notifying the insurer

If, after the cover starts, you think you may not have met your duty, please tell us immediately and we’ll let you know whether it has any impact on the cover.

Telephone contact

After you submit your application, we may contact you by phone to collect any information missing from your application. The information you provide will be recorded and used in the assessment of your application for insurance cover. The need for you to take reasonable care not to make a misrepresentation to the insurer before the contract of insurance is entered into also applies during any phone contact with us.

If you need help

It’s important that you and every person answering our questions understands this information and the questions we ask. Ask us or your adviser for help if you have difficulty answering our questions or understanding the application process.

If you’re having difficulty due to a disability, understanding English or for any other reason, we're here to help and can provide additional support for anyone who might need it. You can have a support person you trust with you.

What can we do if the duty is not met?

If a person who answers our questions does not take reasonable care not to make a misrepresentation, there are different remedies that may be available to us. These are set out in the Insurance Contracts Act 1984 (Cth). They are intended to put us in the position we would have been in if the duty had been met.

For example, we may do one of the following:

  • avoid the cover (treat it as if it never existed)
  • vary the amount of the cover
  • vary the terms of the cover.

Whether we can exercise one of these remedies depends on a number of factors, including all of the following:

  • whether the person who answered our questions took reasonable care not to make a misrepresentation. This depends on all of the relevant circumstances. This includes how clear and specific our questions were and how clear the information we provided on the duty was
  • what we would have done if the duty had been met – for example, whether we would have offered cover, and if so, on what terms
  • whether the misrepresentation was fraudulent
  • in some cases, how long it has been since the cover started.

Before we exercise any of these remedies, we will explain our reasons, how to respond and provide further information, and what you can do if you disagree.

Key dates

27 September 2021

Duty of Disclosure replaced across all consumer insurance

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Key dates

27 September 2021

Duty of Disclosure replaced across all consumer insurance

Navigate to

Contact us