The owner of a 1970 show car insured for $200,000 has won a dispute with RACQ after it denied his claim on the basis he did not disclose two licence suspensions and a good behaviour order when buying his motor policy.

The Australian Financial Complaints Authority (AFCA) said it was not satisfied RACQ had clearly informed the man of his duty of disclosure.

The insurer’s practices "are not necessarily consistent with its stated processes,” AFCA said, adding there were questions over whether procedural guidelines “reflected actual practice rather than merely the intention of RACQ”.

“RACQ is not entitled to avoid the contract based on an innocent failure of the complainant to provide information for which he was not, on balance, specifically asked,” AFCA said. “It is required to accept and settle the claim.”

The vintage car owner took out comprehensive motor cover directly with RACQ over the phone in November 2018 for an agreed value of $200,000. The 50-year old vehicle - a "show car" fitted with an extensive array of modifications and accessories - was involved in a collision in August the following year. It was assessed as a write-off by RACQ.

RACQ declined the claim, saying it would not have offered insurance if it had known that in the preceding years the man's licence was disqualified for 12 months for driving while suspended, and for three months for an accumulation of demerit points. He also had a six-month good behaviour bond.

The man told AFCA that he had in fact disclosed the suspensions and was never asked about a good behaviour period.

“Although a question may have been asked about licence suspensions, there is nothing to confirm that,” AFCA’s ruling says. “RACQ does not have a telephone call recording of the policy purchase. However, a recent policy purchase recording indicates RACQ’s practices are not necessarily consistent with its stated processes.”

RACQ, which did not have call recording technology in 2018, was able to provide a call recording from January last year, when the same man sought to insure a second vehicle with the same sales consultant who arranged his first policy.

The procedure in that phone call did not follow RACQ policy, AFCA says, as the consultant – who admitted to “feeling flustered” – at no point read or otherwise provided the man with a statement explaining duty of disclosure.

“Rather … the consultant asked if the complainant preferred to pay for the policy immediately, or later. At this point, the complainant prompted the consultant to ask about his licence history, who responded ‘Yeah. Sorry. OK...’, as if he had forgotten to go through that part of the sales process,” AFCA says.

This occurred despite the man having stated at the outset of the call that his licence had been suspended.

“That RACQ asked how the complainant preferred to pay for the policy might be regarded as indicating it was ready to offer cover without explaining the nature and effect of the duty of disclosure - and even more significantly, without at that point having asked or received answers to underwriting questions which were relevant to the risk,” AFCA said.

“RACQ presents its sales process as robust,” AFCA said. “That is not necessarily or always the case.”

RACQ said it was normal policy to ask about suspensions, disqualifications, good behaviour periods and claim history, yet none of these questions were evident in the January 2020 phone call.

“The consultant who arranged the subject policy did not adhere to this format on that occasion.

“That raises concerns about whether that same consultant conducted the previous policy inception call in a similar way and, significantly, whether the stated sales process actually reflected actual practice, rather than merely the intention of RACQ,” AFCA said.

“Given this less than rigorous approach to the duty of disclosure … the Panel is not satisfied RACQ has met its obligation,” the ruling says.

A copy of the policy schedule supplied by RACQ to the man recorded no licence suspensions and the insurer argued the man should have made contact to correct the information in the nine months prior to the collision.

AFCA’s panel responded that it was not “fair or appropriate” for RACQ to rely solely on written documentation provided after the policy was taken out to “absolve it of a responsibility to clearly set out the duty of disclosure during the policy inception phone call”.

See the full ruling here.