The industry may face pressure to explain its underwriting processes as a senator pushes for changes to home and contents policies to protect small business owners who operate from home.

Public awareness that home and contents customers may void coverage if they fail to disclose business activity at their residential address has grown after a series of ABC News reports. Many people have told the ABC that they were told by their insurers their cover would be cancelled if they continued with the activity.

Claims may even be denied on grounds they did not disclose that business activity was taking place.

ACT Independent Senator David Pocock says he is writing to Financial Services Minister Stephen Jones, the Australian Financial Complaints Authority and the Insurance Council of Australia (ICA) after learning thousands of Australians who have their home addresses registered for ABN purposes may have voided their cover.

“97% of Australian businesses are small businesses, so this is affecting a huge number of people, it's something that we really need to look at,” Senator Pocock was quoted as saying by ABC News.

“It makes no sense to me that even if you do have home and contents and small business insurance, that you're not covered because of this.”

The insurance industry has sought to explain its position, saying information “relevant” to a policy is part of the process.

“When a customer purchases or renews insurance the insurer asks a range of questions, seeking information relevant to the policy including whether any business or commercial activity will be conducted at the property,” the ICA says.

“It is important questions are answered accurately and truthfully, no matter how large or small or the type of business activity, inaccuracies or omissions may put cover and future claims at risk.”

Major personal lines insurers have also provided their approach for underwriting home and contents risks.

“It is important our customers have the correct cover for their property – and we encourage anyone who is unsure to contact us so we can clarify their situation and how the policy would apply,” a spokesman for Suncorp brand AAMI told insuranceNEWS.com.au.

“As with all personal insurers, our home insurance policies are underwritten and priced for the risk of a domestic private home.”

The spokesman says when a business is being run out of the home, it could represent a “significantly” different risk.

An Allianz spokesman says the insurer relies on the “accuracy and honesty” of policyholder responses to ensure correct insurance cover for their circumstances.

“Regardless of the type of cover, policyholders are required to meet disclosure obligations when obtaining, changing or renewing insurance cover,” the spokesman said.

IAG says home insurance policies are not designed for customers who are running a business from home. For example, commercial cooking in a home’s kitchen can potentially mean an increased risk of an accident due to the work being undertaken.

“Customers are required to tell us about the use of the property before they take out a policy,” IAG says.

“They also need to let us know if there are any changes, which may impact the range of risks at the property, such as running a business from home. This may result in a policy not being offered or an existing policy being cancelled.”

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