An insurer has been ordered to reinstate a motor policy and reopen a crash claim after its requests for information were found to be unreasonable.

A dispute arose after an Auto & General policyholder said she hit her partner’s stationary car while reversing out of her garage.

The insurer raised concerns about the partner’s criminal history, because the claimant had initially disclosed a drug-related offence for them – a listed driver – but then arranged a new policy without mentioning the offence.

It also suggested the vehicle was being used for commercial purposes. The insurer requested a police check for the partner, the claimant’s daily delivery run sheets and an invoice for a delivery.

The woman refused to provide the documents, saying her partner was not involved in the accident and no delivery records existed because she was not running a business.

Auto & General closed the claim and cancelled the policy.

The Australian Financial Complaints Authority says any request for additional information must be fair and reasonable.

“It must not be a ‘fishing’ exercise,” AFCA said.

An insurer must put allegations to a policyholder clearly and in plain English, explain their relevance and give the person an opportunity to respond, the ombudsman adds.

In this case, the insurer only “hinted at such things for much of the claim process”.

“In the absence of an express allegation regarding fraud or misrepresentation, the insurer has not, in my opinion, adequately explained how a [police check] for [the partner] is relevant to its assessment of this specific claim,” an AFCA member said. 

The insurer should have requested the claimant attend an interview, so the issues could be clarified.

The ombudsman has also criticised the way the insurer communicated the policy cancellation on the basis the vehicle was used to carry passengers or goods for payment.

“The lack of information in the exchanged material is concerning ... I am compelled to find the insurer has likely failed to comply with its statutory obligations.

“Specifically, the insurer has failed to identify which limb of section 60 [of the Insurance Contracts Act] the decision to cancel the policy was based upon.”

AFCA has ordered Auto & General to reinstate the policy, remove the cancellation record and reopen the claim.

It has also awarded the complainant $4000 compensation for stress, anxiety, inconvenience and disruption caused by the insurer’s claim handling.

See the ruling here.