Car Insurance and the Importance of the Proposal Form

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The change from paper to digital hat in many ways changed both the format and the understanding of what a proposal form is in the context of car insurance. Pre internet, people would have to fill in a proposal form in order to acquire car insurance, often having been given a verbal quote first of all.

Nowadays, insurance companies have pushed the whole mechanism of obtaining car insurance online, and people had to fill in a meaningful amount of information, often over several screens, in order to acquire a car insurance quotation, and acquire cover itself. The difference, is that many people often think of the online questions as more of a questionnaire, instead of as a legal document, which in effect is what it is.

It is worth understanding the context of a proposal form, whether it be in paper or digital format, given that any wrong or misinformation can invalidate the insurance policy, and allow the insurance company to deny any liability in paying future claims.

A proposal form is the basis on which the insurance company obtains information on a possible customer, that allows them to estimate a risk, and decide whether or not to agree to insure them, and if so, on what terms and conditions and at what cost. The proposal form will include a number of questions designed to elicit the information that the insurance company feels it needs to know in order to estimate the risk.

What is often not understood about a proposal form, is that the possible customer has an obligation to disclose any information that might be applicable to the insurance company in order to make this assessment. This is irrespective of whether or not there are any questions that cover the information. This rule in insurance terms is known as utmost good faith. It puts the onus on the possible customer to disclose all information that an insurance company might reasonably expect to be applicable.

A proposal form will often have several parts to it, with several sub-sections depending on particular answers. One obvious example would be that of motoring convictions. If the question is asked whether or not the insured has any prior motoring convictions, it will typically be a simple yes or no answer to begin with. If the answer is no, then the insured goes on to another question. If the answer is yes then there is typically space for the insured to give details of what these convictions were.

This is a fairly obvious example of where the information is important for the insurance company to have complete and frank details. If the prospective customer or insured gives wrong information, or misleading information, it can affect the judgement of the insurance underwriter. past convictions can be a good indicator of someones attitude to driving and any restrictions placed upon them, such as speed limits.

Some people will give false information in the hope that they will not be found at, although this is a dangerous and risky assumption. typically people will give the wrong information either because they dont remember things precisely, or they feel that some information is too old or out of date to be applicable. Again this is risky, because it can invalidate their policy.

One thing that is worth remembering is that insurance companies will typically only check the details given in the proposal form when there is a need for the insured to make a claim on the policy. If no claim is made, the insurance company will typically not bother. If a claim is made, then they will check if all the information on the written proposal form was accurate, and if not, it may well give them an opportunity to deny the claim and deny any liability under the terms of the policy.

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