An international student will have her vehicle claim covered despite failing to disclose pre-existing hail damage after the Australian Financial Complaints Authority (AFCA) found she had not breached her duty.

The complainant lodged the claim after she had been involved in an at-fault accident with a third party in January. 

Allianz declined the claim and cancelled the policy after alleging she misrepresented the condition of her 2000 Hyundai Accent by failing to notify it of pre-existing hail damage. 

The insurer notes that the car owner answered “no” to a question asking if the vehicle had any “unrepaired damage”, excluding minor scratches and wear and tear, when she applied for her policy in August last year.

It says the policyholder breached her duty to take reasonable care not to make a misrepresentation and prejudiced its decision to accept the risk, which it says it would have rejected if it knew the vehicle’s condition. 

The complainant, a student who had only recently arrived in Australia, says she did not know what hail damage was and that the car appeared to have been in good condition. 

AFCA acknowledged that the vehicle did have hail damage, which likely pre-dated the policy, after observing photographs from the assessor’s report. However, it notes that this damage had been overstated and did not showcase that the vehicle had been in a “below average condition”. 

“I accept the IV did present with pre-existing hail damage at the time the policy was arranged,” AFCA said.

“However, simply showing the complainant made a misrepresentation is not enough for the insurer to show the complainant breached her duty.

“The insurer must also show the complainant made the misrepresentation by failing to take reasonable care.” 

AFCA challenged Allianz’s position that the driver was required to disclose the damage, saying that the policy question only asked for damage that was considered “unrepairable”.

It says it was “not unfair” to consider that she believed that the damage was wear and tear, given the car had been over 20 years old and her unfamiliarity with hail damage.

“I am satisfied it is fair to accept the complainant was not aware of what hail damage is, and that she was of the opinion the IV was in good condition at the time of arranging the policy,” AFCA said.

“Further, it is fair to accept the complainant viewed the damage to the IV as minor and consistent with general wear and tear given its age and kilometres travelled.

“The insurer has not provided any persuasive view or information explaining this an unreasonable position.”

The ruling ombudsman also remarked on Allianz’s “attempt to educate” it on what matters it could and could not consider, and the fact that it has not provided a statutory declaration on the application of its underwriting guidelines.

“Regardless of my opinion on the attempt to educate AFCA on what it can consider or not, I am not satisfied the guidelines referred to assist the insurer’s position,” AFCA said.

“I note the guidelines provided by the insurer’s representative for AFCA’s consideration were issued on July 10 2023.

“Given this, these guidelines did not exist at the time the policy was arranged on August 29 2022 or the date of loss (January 25 2023) giving rise to the claim.”

The ruling required Allianz to reinstate the complainant’s policy and accept the claim to cover her losses as well as liability for the third-party losses.

It also awarded the insured compensation for non-financial losses after finding that the insurer had inadequately managed the claim with poor communication and unnecessary delays. 

"These delays and an incorrect assessment of its liability under the policy resulted in the [third party] commencing legal recovery proceedings against the complainant," AFCA said.

“It is fair to accept, as an overseas student who had only recently come to Australia, this will have been a highly stressful and inconvenient experience.

“Accordingly, I am satisfied it is fair that the insurer pays the complainant $2,000 in [non-financial losses] as per the AFCA Rules.” 

Click here for the ruling.