The financial services ombudsman has drafted new guidance on its handling of life insurance disputes related to the duty to take reasonable care not to make misrepresentations.

The Australian Financial Complaints Authority is seeking feedback on the proposed approach, which features case studies showing how it will respond to different dispute scenarios.

It says a misrepresentation is typically a statement of “fact that was untrue; opinion that was not the subject of an honestly held belief or intent that never existed at the time the statement was provided.

“A misrepresentation would ordinarily be limited to statements that induced the insurer into issuing the policy. This would typically be the complainant’s incorrect answers to the insurer’s questions when applying for the policy. It can also apply to answers previously made which the complainant failed to correct.”

The authority is also seeking feedback on its new approach for life insurance complaints involving the separate duty of disclosure and requirement to not make a misrepresentation. 

AFCA says the approach does not apply to disputes about policies that are consumer insurance contracts.

See the draft approaches here.