When can an insurer change the terms of an insurance policy?

The ability of an insurer to change the terms of an insurance policy is influenced significantly by the nature of the circumstances surrounding the policy. A key condition under which an insurer can make such changes is indeed upon discovery of careless misrepresentation by the insured. This means that if the insurer finds that the policyholder has provided false or misleading information that affects the risk being insured, it is within the insurer's rights to adjust the policy terms accordingly. This is because the insurer relies on the accuracy of the information provided at the time of underwriting the policy and if it becomes apparent that misrepresentations were made, the insurer's obligation under the policy may change.

Changes due to careless misrepresentation are essential to the risk assessment process, as insurers must ensure they are accurately reflecting the risk they are underwriting. This principle is foundational in insurance law and helps protect the integrity of the insurance contract.

In contrast, while regulatory approval might often be required for significant policy changes, this does not universally apply to all minor adjustments or to changes prompted by misrepresentations. Similarly, while a policyholder can request adjustments, the insurer is not obligated to comply with all such requests, particularly if they believe modifications could increase their risk unnecessarily. Aligning with market standards is also an important factor