Misrepresentation

Definition:

The act of making false statements or intentionally providing fake information or details during the purchase of a life insurance policy is known as misrepresentation. In case of misrepresentation by the life insured, the insurance company has the right to terminate the policy.

Description:

Misrepresentation is generally conducted by the policyholders. They provide details that are not genuine while signing the insurance policy. There are three types of misrepresentation. Below is the explanation:

1. Fraudulent misrepresentation: When the policyholder provides false information with an intent to take undue advantage of the insurance policy.
2. Innocent misrepresentation: When the policyholder gives information that he/she believes to be true at the time of contract signing. But actually, the information is false.
3. Material misrepresentation: When the policyholder fails to disclose or intentionally hides sensitive information (like pre-existing medical conditions) that can impact the policy issuance is known as material misinterpretation.

Example:

Mayank was interested in buying a term insurance plan. He requested a ₹1 Crore term insurance policy quotation from a life insurance company. In order to take advantage of a low premium, he did not disclose about his smoking habits while filling out the forms. The insurer accepted his proposal based on the information provided.

Unfortunately, Mayank contracted lung cancer after a few policy years. As cancer was covered in the term insurance policy, he filed a claim. While filing he submitted all the required documents. While analysing his medical reports the insurance company found out about Mayank’s smoking habit. As he tried hiding this sensitive information from the life insurance company, this came under misrepresentation. Based on this activity of Mayank, his claim got rejected despite all the premiums being paid.

ADV/9/22-23/1534