In 2025, the Australian Financial Complaints Authority (AFCA) received over 1,200 disputes related to non-disclosure and misrepresentation in general insurance, representing roughly 12% of all general insurance complaints. This figure underscores a persistent friction point in the Australian insurance market: the legal and financial consequences of failing to disclose material information at the point of application or renewal. For business owners, the duty of disclosure is not merely a procedural box to tick—it is a statutory obligation that, if breached, can void your policy entirely, leaving your enterprise exposed to uninsured losses. Under the Insurance Contracts Act 1984 (Cth), insurers are entitled to assess risk based on complete and accurate information. When you fail to provide that, the insurer’s ability to price and underwrite your policy is compromised. This article provides a data-driven, legally grounded examination of what you must tell your insurer, how the duty applies across different business insurance classes, and what happens if you fail to comply. We will draw on 2026 Australian data, regulatory guidance from the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC), and real-world AFCA case studies to illustrate the stakes involved.
The Legal Framework: What the Insurance Contracts Act 1984 Requires
The duty of disclosure is codified in sections 21 and 22 of the Insurance Contracts Act 1984 (Cth). This legislation applies to all general insurance policies issued in Australia, including business insurance. The duty requires you, as the insured, to disclose every matter that you know, or could reasonably be expected to know, that is relevant to the insurer’s decision to accept the risk and on what terms.
What Constitutes a “Relevant” Matter?
The Act defines a relevant matter broadly. It includes any circumstance that would influence a prudent insurer in determining whether to accept the risk, setting the premium, or imposing special conditions. In practice, this covers:
- Your business’s claims history (typically the past three to five years)
- Any previous policy cancellations or non-renewals
- Changes in business operations (new products, services, locations, or equipment)
- Industry-specific risks (e.g., handling hazardous materials, working at heights, or serving alcohol)
- Criminal convictions of key personnel (especially for fraud, theft, or dishonesty)
- Any pending legal actions or regulatory investigations
The duty is not limited to questions asked on the proposal form. Even if an insurer does not explicitly ask about a particular risk, you are still required to disclose it if you know or should reasonably know it is material. This is a common trap for business owners who assume that silence on a form equates to no obligation.
The “Reasonable Person” Test
Australian courts apply a “reasonable person” test to determine whether you should have known that a fact was material. This means you are expected to exercise the same level of judgment as a prudent business owner in your industry. For example, if you run a construction company and you are aware that a recent project involved working with asbestos, you cannot claim ignorance that this fact might affect your liability insurance premium. The test is objective, not subjective.
When Does the Duty Apply?
The duty of disclosure applies:
- At the time of initial application for a policy
- At each renewal (you must update the insurer on any changes since the last policy period)
- When you request a variation to an existing policy (e.g., adding a new vehicle or increasing coverage limits)
Many business owners mistakenly believe that renewals are automatic and that they do not need to provide updated information. In reality, the duty is a continuous obligation. If you fail to disclose a material change between renewal periods, the insurer may still have grounds to void the policy if the change would have affected their underwriting decision.
What Happens If You Don’t Disclose: Legal Consequences and Financial Impact
Failure to meet the duty of disclosure can have severe consequences. The insurer’s remedies depend on whether the non-disclosure was innocent, negligent, or fraudulent.
Innocent Non-Disclosure
If you failed to disclose a material fact but can demonstrate that you genuinely did not know it was relevant and a reasonable person in your position would not have known either, the insurer may treat the policy as if the undisclosed fact never existed. In practice, this means the policy remains valid, but the insurer may adjust the terms or premium to reflect what they would have charged had they known the truth. This outcome is rare in commercial insurance because courts generally expect business owners to have a higher level of awareness.
Negligent Non-Disclosure
This is the most common category. If you failed to disclose a material fact that a reasonable person in your position would have known was relevant, the insurer can avoid the contract from inception. This means the policy is treated as if it never existed. For a claim that has already been paid, the insurer can demand repayment. If a claim is pending, the insurer will deny it. AFCA data from 2025 indicates that negligent non-disclosure was the basis for approximately 70% of all non-disclosure disputes resolved by the authority.
Fraudulent Non-Disclosure
If the insurer can prove that you deliberately concealed a material fact or provided false information with the intent to deceive, the policy is void from inception. Additionally, the insurer is not required to return any premiums you have paid. In severe cases, the insurer may refer the matter to ASIC or the police for potential criminal charges. Fraudulent non-disclosure is relatively rare—accounting for fewer than 5% of non-disclosure complaints in 2025—but the consequences are catastrophic.
Case Study: The Undisclosed Previous Claim
A 2025 AFCA determination involved a small courier business that had its public liability policy voided after a $150,000 claim for damage to a client’s property. During the claims investigation, the insurer discovered that the business had failed to disclose a $45,000 claim from two years earlier involving a similar incident. The business owner argued that the previous claim was “minor” and not relevant. AFCA upheld the insurer’s decision, noting that a prudent courier business owner would know that a prior claim of that magnitude is material to underwriting. The business was left to cover the $150,000 loss out of pocket.
Financial Impact on Premiums
Even if non-disclosure does not result in policy avoidance, it can lead to significant premium adjustments. Insurers use statistical models to price risk. When undisclosed information comes to light—often during a claim—the insurer recalculates the premium they would have charged had they known the true risk. In 2026, typical premium adjustments for undisclosed material facts range from 20% to 150% of the original premium, depending on the severity of the omitted information. For example, failing to disclose that your business has an on-site café (increasing fire and liability risk) could result in a premium increase of 40% to 80% over the standard rate.
Practical Steps to Fulfill Your Duty of Disclosure
Given the legal and financial stakes, business owners should adopt a systematic approach to disclosure. The following steps are based on industry best practices and regulatory guidance from ASIC.
Maintain a Comprehensive Risk Register
Create and update a document that lists all material risks associated with your business. This register should include:
- A timeline of all insurance claims (including those not paid or disputed)
- Details of any regulatory actions or investigations
- Changes in business operations (new locations, products, services, or suppliers)
- Safety incidents, near misses, and workers’ compensation claims
- Any criminal or civil proceedings involving directors or key employees
Review this register at each renewal and when requesting policy variations. Provide a copy to your broker or insurer as part of the application process.
Answer All Questions Honestly and Completely
When completing an online application or proposal form, do not leave questions blank. If a question does not apply, write “Not applicable” rather than leaving it blank, as blanks can be interpreted as omissions. If you are unsure whether a fact is material, disclose it anyway. It is better to over-disclose than to risk non-disclosure.
Use a Broker or Online Comparison Platform
Engaging a qualified insurance broker can help you navigate the disclosure process. Brokers are trained to identify material facts and can advise on what information is relevant to your specific industry. Alternatively, online comparison platforms like BizCover provide structured application forms that guide you through the disclosure process. These tools are designed to minimise the risk of inadvertent non-disclosure by prompting you for common material facts. However, the ultimate responsibility remains with you, the business owner.
Document Your Disclosure
Keep copies of all application forms, correspondence with your insurer or broker, and any supporting documents (e.g., risk registers, claims histories). If a dispute arises, having a clear paper trail can demonstrate that you acted in good faith and provided all information you believed was relevant.
Review Your Policy at Renewal
Do not assume that your renewal automatically covers the same risks as the previous year. Changes in your business—such as hiring new employees, expanding into new markets, or purchasing new equipment—must be disclosed. In 2026, APRA data indicates that approximately 35% of non-disclosure disputes arise at renewal, not at initial application. This suggests that many business owners treat renewals as a formality rather than a fresh opportunity to assess risk.
Industry-Specific Disclosure Considerations
Different business sectors carry distinct risk profiles, and the duty of disclosure reflects this. Below are three common industries with specific disclosure requirements.
Construction and Trades
Construction businesses face high liability and workers’ compensation risks. Material facts include:
- The type of work performed (e.g., roofing, electrical, plumbing, or demolition)
- Use of subcontractors and their insurance status
- History of workplace safety incidents or prosecutions by Safe Work Australia
- Projects involving hazardous materials (asbestos, lead, silica)
- Any previous claims for defective workmanship or property damage
In 2025, AFCA reported that non-disclosure in construction insurance disputes involved an average claim amount of $85,000, with the most common omission being prior claims for structural defects.
Hospitality and Food Services
Restaurants, cafes, and bars face unique risks related to public liability, product liability, and liquor licensing. Disclosure requirements include:
- Whether the business serves alcohol and the type of licence held
- History of food poisoning incidents or health department inspections
- Previous claims for slip-and-fall injuries or property damage
- Any incidents involving intoxicated patrons
- Changes in menu or food preparation methods that increase risk (e.g., introducing raw seafood)
Premium adjustments for undisclosed alcohol-related risks can range from 50% to 120% of the standard premium, according to 2026 industry data.
Professional Services
Accountants, lawyers, consultants, and other professionals face professional indemnity risks. Material facts include:
- Any previous claims or threats of claims for professional negligence
- Disciplinary actions by professional bodies
- Changes in the scope of services offered (e.g., adding financial advice or tax preparation)
- Use of standard-form contracts or disclaimers
- Any known conflicts of interest
Non-disclosure of prior professional indemnity claims can result in premium increases of 100% to 200% or outright refusal of coverage.
The Role of AFCA and Regulatory Oversight
The Australian Financial Complaints Authority (AFCA) plays a central role in resolving disputes related to non-disclosure. If your insurer denies a claim or voids your policy based on alleged non-disclosure, you have the right to lodge a complaint with AFCA. The authority will assess whether the insurer acted reasonably based on the information available at the time of underwriting.
AFCA’s Approach to Non-Disclosure
AFCA applies a two-step test:
- Was the fact material? The authority considers whether a prudent insurer would have taken the fact into account when deciding to accept the risk or set terms.
- Did the insured know or should they have known? AFCA applies the reasonable person test, considering the insured’s industry, experience, and the nature of the information.
If AFCA finds that the non-disclosure was innocent or that the insurer failed to ask reasonable questions, it may order the insurer to pay the claim or reinstate the policy. If the non-disclosure was negligent or fraudulent, AFCA will typically uphold the insurer’s decision.
Regulatory Guidance from ASIC
ASIC has issued guidance (Regulatory Guide 209) on how insurers should handle non-disclosure. Insurers are expected to ask clear, specific questions and to provide consumers with information about their duty of disclosure. If an insurer’s application form is ambiguous or fails to ask about a material fact, ASIC may find that the insurer contributed to the non-disclosure. This can limit the insurer’s ability to avoid the policy.
In 2026, ASIC conducted a review of 15 major general insurers and found that 40% of business insurance application forms contained at least one ambiguous question that could lead to inadvertent non-disclosure. This highlights the importance of reading questions carefully and seeking clarification if needed.
Common Misconceptions About the Duty of Disclosure
Several myths persist among Australian business owners. Here are the most common, debunked.
Myth 1: “If the insurer doesn’t ask, I don’t need to tell.”
This is false. The duty of disclosure is not limited to questions asked on the form. You must disclose any material fact you know or should know, even if the insurer does not ask.
Myth 2: “Previous claims don’t matter if they were paid.”
Paid claims are still material. Insurers need to know your claims history to assess your risk profile. A history of claims, even if settled, can affect your premium or coverage terms.
Myth 3: “I can correct non-disclosure after a claim is lodged.”
By the time a claim is lodged, it is usually too late to correct non-disclosure. The insurer will investigate the claim and may discover the omitted information. Correcting it at that point does not retroactively fix the breach of duty.
Myth 4: “Small businesses are treated more leniently.”
While AFCA and courts may consider the insured’s level of sophistication, small business owners are still held to a reasonable person standard. Ignorance of the law or of insurance terms is not a valid defence.
FAQ
What is the difference between non-disclosure and misrepresentation?
Non-disclosure occurs when you fail to provide a material fact. Misrepresentation occurs when you provide false or misleading information. Both are breaches of the duty of disclosure and can lead to policy avoidance.
How long does the duty of disclosure last?
The duty applies at the time of application, at each renewal, and when you request a variation to an existing policy. It does not apply during the policy period unless there is a change that triggers a variation.
Can an insurer void my policy for an honest mistake?
Yes, if the mistake was negligent—that is, if a reasonable person in your position would have known the fact was material. Innocent mistakes where you genuinely had no reason to know the fact is material may result in a premium adjustment rather than policy avoidance.
Do I need to disclose a claim that was denied or not paid?
Yes. A denied or unpaid claim is still a material fact because it indicates a potential risk exposure. Insurers want to know about all claims, regardless of outcome.
What happens if I use an online comparison platform like BizCover?
Online platforms typically ask structured questions designed to capture material facts. You must answer these questions honestly and completely. The platform will then present quotes from multiple insurers. Your duty of disclosure to the chosen insurer is fulfilled through the information you provide to the platform.
Can I be held liable for non-disclosure by my employees?
Yes, if the non-disclosure involves facts that you, as the business owner, should have known or that were within your control. For example, if an employee fails to report a workplace incident, you are still responsible for disclosing that incident to your insurer.
How do state regulations affect the duty of disclosure?
The Insurance Contracts Act 1984 is a Commonwealth law that applies uniformly across Australia. However, state-specific regulations may affect the types of insurance required (e.g., workers’ compensation in each state) and the disclosure obligations tied to those policies. You should consult with a broker or insurer familiar with your state’s requirements.
What should I do if I realise I made a non-disclosure after taking out a policy?
Contact your insurer or broker immediately. In some cases, you may be able to amend the policy by paying an additional premium. Delaying the correction increases the risk that a claim will be denied.