Life insurance


As mentioned in the previous section, insurance contracts are based on trust. The nature of the subject matter of insurance and the circumstances pertaining to it are facts within the knowledge of the policyholders. Insurers, on the other hand, are not aware of these facts unless the policyholders tell them.  Therefore, policyholders must tell the whole truth.

Non-disclosure arises when an applicant for an insurance policy fails to disclose on the application form material facts within his/her actual or presumed knowledge. Clearly, the information given by an applicant in the application form can have a great impact on the insurer's underwriting assessment. From the information given in the application form, the insurer can identify high-risk features and decide whether or not to take on the risk, and at what premium and terms.

It is important to note that the majority of non-disclosure disputes are related to the medical history of the policyholders. Non-disclosure can result in policy repudiation and claim rejection.

Although the majority of non-disclosure disputes arise from the policyholders’ failure to disclose their complete medical history, material information is restricted not only to medical records. Other information, such as history of past claims, average length of stay outside Hong Kong, smoking and drinking habits, previous traffic offences or occupations, may also affect an insurer's decision in fixing the premium or determining whether or not to underwrite the risk.

If the non-disclosed information is material enough to have affected the underwriting decision of an insurer, it may be legitimate for the insurer to decline a claim even though the non-disclosed information is not related to the current illness because the non-disclosure would have prejudiced the insurer from making a fair and accurate underwriting assessment. This could provide justification for the insurer to repudiate the contract from inception.

You should not rely solely on your insurance agent in deciding whether or not a piece of information is material. In order to avoid unnecessary claims disputes, you should disclose all information and all material facts fully and accurately when filling in the application form.  If in doubt as to whether a fact is material, it is better to disclose it.