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Back in January, the Association of British Insurers confirmed insurers would pay out more claims where medical information had not been disclosed unless it had been deliberately withheld.

Their new guidelines set out three categories of non-disclosure and how insurers should deal with a claim in each category. The intention was to introduce uniformity across the industry.

Innocent non-disclosure arises where the customer has acted honestly and where a reasonable person would not have thought the non-disclosed details were all that relevant to the insurer. In these circumstances the claim should be paid in full.

At the other end of the scale is deliberate non-disclosure, where the customer has clearly and deliberately withheld information, knew the information provided was incorrect or acted without proper care. The insurer can void the policy, decline the claim and return premiums paid.

The middle ground allows for negligent non-disclosure. According to the ABI, this includes anything from an understandable oversight or an inadvertent mistake to serious negligence. This is something of a grey area, in that it must be the case a reasonable person would have known the information to be incorrect and relevant to an insurer.

The outcome here is for the insurer to apply a proportionate remedy. This means the provider must seek to put the customer back to the same position as an identical customer who had accurately disclosed the omitted information and who paid the same premium for the same type of policy.

At claim insurers will look to pay a reduced sum assured in line with the proportionate remedy applied.

Some insurers, like Zurich, have been applying this proportionate remedy for some time. It is a common-sense approach, doing the right thing, treating customers fairly.

Under the new ABI guidelines, insurers are only allowed to ask for further information that is directly linked to a claim.

But what can the intermediary do to help?

* Always ensure you emphasise the nature of the contract between customer and insurer and the need for full disclosure

* Explain how insurers only have the application form upon which to judge information supplied – if information is withheld, the insurer is prevented from assessing the full facts

* Ensure the customer answers the questions on the application form fully and honestly

* If in doubt – provide details

* Advise clients that they can provide information direct to the insurer

Getting it right first time gets it right for all parties.

Gerry Warner is protection development manager of Zurich UK Life