Misrepresentation takes place when the party who applies for insurance cover provides written or verbal information to the insurance company that is untrue or misleading. Misrepresentation can also take place when an existing contract of insurance is due for renewal. The term material misrepresentation is used when an insurance applicant makes a false statement of any material (important) information. An example in car insurance will be where the application states that the car is kept in a locked garage overnight, meanwhile the car is parked outside in the street every night.

The above example is a deliberately false statement made by the applicant to obtain a cheaper insurance rate. Material facts have an impact on whether or not the insurer decides to agree to provide the insurance cover; or it may also impact on the terms and conditions of the policy.

Fraudulent misrepresentation will have involved the following: the party making the statement is well aware of the fact that the information is untrue; he deliberately makes the false statement to persuade the insurer to accept the contract; the insurer agrees to the insurance on the grounds of the false information.

Misrepresentation could also be innocent, however whether it is innocent or fraudulent misrepresentation – the insurance company has the right to repudiate (reject as invalid) the contract or reject a specific claim.