When applying for business insurance, full disclosure is not just a legal requirement, but a cornerstone of safeguarding your business, and failing to disclose relevant information can lead to severe consequences, including policy cancellation and denied claims.
For example, failing to disclose a County Court Judgment (CCJ) or a history of voluntary liquidation could lead to the insurer refusing to pay out- or even voiding the policy entirely.
Consider this real-world scenario: a business applied for fire damage insurance but failed to disclose previous voluntary liquidation.
When the insurer discovered this during the renewal process, the policy was cancelled, leaving the business uninsured.
Even if the undisclosed information appears unrelated to the insured risk - such as financial difficulties in a fire insurance claim - insurers may adopt a zero-tolerance approach, leaving businesses exposed.
Non-disclosure can occur for various reasons. A business owner might innocently forget to disclose information they consider insignificant. Others might believe certain details, such as penalty points on a driving license, are irrelevant.
Some may even intentionally withhold information in the hope of securing a lower premium or avoiding rejection. Ultimately, however, such omissions only harm the business.
Claims are scrutinised by loss adjusters, who investigate company records and directorship histories in detail, making it virtually impossible to conceal facts.
Insurance applications typically require disclosure of refused insurance policies, cancellations, or special terms imposed by previous insurers.
Other mandatory disclosures include criminal convictions, pending prosecutions (including insurance fraud), and financial adversities such as bankruptcies, liquidations, or CCJs within the last five years.
Driving licence points, convictions, or any illnesses or disabilities that could impact driving (as reported to the DVLA) must also be declared. Even changes in company directorships, which might seem trivial, must be reported.
To stay compliant, businesses should maintain accurate records—such as a spreadsheet tracking driver penalty points—and update them every six months.
Failing to disclose or providing inaccurate information can invalidate a policy due to a breach of its terms.
This can delay claims, increase costs, or result in your business being flagged as high-risk. If a client is unsure whether a fact needs to be disclosed then they should eliminate any doubt and just disclose it and let the broker and ultimately the insurer decide as to whether or not it’s relevant to the risk.
A skilled insurance broker is an invaluable ally. Brokers understand the complexities of disclosure and guide clients through the process, ensuring compliance and advocating for their best interests.
They can identify insurers more willing to accommodate specific risks, negotiate terms on the client’s behalf, and educate clients about the implications of non-disclosure.
While brokers can highlight what needs to be disclosed and help businesses navigate these requirements, the final decision rests with the underwriter.
Businesses are advised to err on the side of caution: disclose everything. Maintain regular communication with your broker or insurer, and keep detailed records of changes, incidents, or potential issues. Doing so will make the renewal process smoother and ensure you’re adequately protected.
Full disclosure is essential to ensure your insurance policy provides the coverage you expect when you need it most.
While it may be tempting to omit details to secure lower premiums or expedite the application process, the risks far outweigh the short-term benefits. Transparency is not just a legal obligation—it is a business imperative.
:: Andy Craig is account executive at AbbeyAutoline (www.abbeyautoline.co.uk)
