What statutory remedy is available to an insurer when a careless qualifying misrepresentation is made by a consumer policyholder?

When a careless qualifying misrepresentation is made by a consumer policyholder, the insurer has the statutory remedy to amend the contract terms and proportionately reduce the claim amount. This means that rather than completely voiding the policy or denying all coverage, the insurer has the option to adjust the terms of the insurance contract and any potential claim payout based on the extent of the misrepresentation.

This approach allows for a more balanced resolution allowing both the insurer and the policyholder to maintain some level of obligation under the contract. The proportionality aspect is crucial here; it means that the adjustment to the claim amount or policy could reflect the actual risk that the insurer would have accepted had they known the correct information at the outset. This remedy is often seen as fair as it provides a middle ground against the harsh repercussions of a complete policy cancellation while still holding the policyholder accountable for inaccuracies in their application.

The other options do not reflect the statutory remedies typically available under insurance law for such situations. For instance, revoking the policy without a refund is overly punitive and does not account for the insurer's ability to adjust based on proportionality. Providing unlimited coverage regardless of misrepresentation would undermine the purpose of honest disclosures in underwriting contracts, and adjusting premiums without altering coverage does not address