What can an insurer do if there is material misrepresentation in a claim?

When an insurer identifies material misrepresentation in a claim, the primary course of action they can take is to reject coverage. Material misrepresentation refers to a false statement or omission that significantly affects the insurer's decision to underwrite the policy or to pay a claim. This means that the insurer relies on the truthfulness and accuracy of the information provided by the insured when forming a contract; if any part of that information is misrepresented, it undermines the validity of the entire claim.

Rejecting coverage allows the insurer to mitigate potential losses that arise from fraudulent or misleading information. This is an important aspect of risk management within the insurance industry, as it helps uphold the integrity of insurance contracts and discourages dishonest practices.

In contrast to this action, other options like providing a higher coverage limit, adjusting policy premiums, or offering a waiver of the deductible do not directly address the issue of misrepresentation nor do they align with the fundamental principles of how insurance operates. Instead, these actions could potentially expose the insurer to greater risk instead of safeguarding against it.