Two recent developments reviewed by the Insurance & Financial Services Ombudsman (IFSO) highlight ongoing challenges in the New Zealand insurance market – increasing disputes tied to policy misunderstanding and the consequences of inaccurate claims disclosures.
In one case, a couple’s motor vehicle insurance policy was cancelled after their claim was found to contain misrepresentations regarding the nature and timing of the damage. The case was brought to the IFSO, which upheld the insurer’s decision to both decline the claim and void the policy.
The couple initially claimed their vehicle was damaged in a single incident involving a collision with a fence. However, the insurer’s investigation revealed three separate damage points that appeared inconsistent with the reported version of events.
The driver later admitted that part of the damage had occurred on a different date at a separate location.
Ombudsman Karen Stevens confirmed that the insurer was entitled to take action on the basis of false information being provided in support of the claim.
“The test for a false statement is whether the statement was wrong, whether the person knew it was wrong when they made it, and whether it was relevant to the claim,” she said, as reported by RNZ.
In this instance, the driver attempted to include unrelated damage in the same claim, which would have affected the excess applied.
Following the incident, the couple’s details were added to the Insurance Claims Register (ICR), maintained by the Insurance Council of New Zealand (ICNZ).
Entries on the register can significantly impact a consumer’s ability to secure future cover.
ICNZ reiterated that trust is fundamental to the insurance process and that a history of misrepresentation can limit access to policies.
Glen McLeod, a broker at Link Advisory, noted that individuals facing such situations may still have options. Insurance advisers can sometimes assist clients with difficult histories by identifying alternative markets or negotiating tailored coverage.
The IFSO Scheme also reported a marked increase in the number of formal investigations into consumer complaints.
Stevens said the service, which had historically handled about 300 investigations annually, is on track to exceed 500 this year.
The rise is attributed to both increased awareness of the IFSO and a consistent level of misunderstanding around insurance policy terms. A frequent issue involves customers assuming comprehensive cover exists simply because premiums have been paid.
Stevens pointed to a recent travel claim where a policyholder cancelled a trip due to a relative’s illness. The insurer reduced the payout because the relative had been in care in the prior year – triggering an exclusion that capped reimbursement.
“She said, ‘Oh, but there was nothing wrong with her, until she got pneumonia in hospital.’ Well, that’s fine, but the policy had an exclusion that actually had nothing to do with her wellness or anything else at the time,” Stevens said.
Undisclosed vehicle modifications, changes in use, and non-notification of new risk factors such as parking locations also contribute to claims being declined.
Rebecca Styles, Consumer NZ insurance researcher, highlighted that moving a vehicle from a garage to street parking without notifying the insurer could be seen as introducing a new material risk.
“Where you park your car is considered a ‘risk factor,’ so that would be taken into account, when pricing your policy – you usually park in a garage, but moved house and now park on the street,” she said. “While I haven’t come across instances of an insurer declining a claim because of this, in the policy, there is a requirement to let the insurer know.”
Additionally, some policies exclude commercial activity, such as rideshare or food delivery driving, unless pre-approved. In these cases, unreported commercial use may invalidate cover.
Missed premium payments also carry risk. If a payment is missed and the cancellation notice not addressed, the policy may lapse, exposing the policyholder to significant financial liability.
Reasonable care clauses further extend insurer expectations.
Stevens noted that leaving a vehicle unlocked or valuables visible can breach these terms, with claim denials resulting even from brief lapses.