Law Commission- Insurance

[jeffrey]

The Report has just been published, with a draft Bill. If the Bill is enacted, it will (so far as concerns consumer contracts for insurance):
a. displace sections 16-20 of the Marine Insurance Act 1906 (which Act, bizarrely, codifies the common-law rules for all insurance contracts); and
b. remove the uberrimae fidei rule which, otherwise, allows an insurer to deny liability for non-disclosure.
See http://www.lawcom.gov.uk/insurance_contract.htm

[ashburnham]

Obviously the biggest "pro" is that consumers will no longer run the risk of an insurer throwing out a claim on something that is not specifically asked at the proposal stage (i.e. if the insurer doesn't ask then that's their problem!). I don't agree with customers specifically trying to hide information from insurers to get cheaper premiums as this is essentially fraud but I also do not agree with insurers rejecting claims when the customer has acted in the utmost good faith when making their proposal (i.e. disclosed everything they thought was relevant).

There are many "cons" with this which affect everyone. Insurers will be certainly have to pay out on more claims as they no longer have their "get out clause". This will have a knock on effect as more claims means higher insurance premiums for the consumers who will essentially be paying for all these extra claims. There is also the possibilty that the number of questions at the time of proposal could increase significantly but all these means is that it will take everyone longer to get a quote.

What's your opinion on this? As a broker and consumer I'm not entirely sure but think I'm swaying towards it being a good idea. It might make our job as brokers a little more time consuming (asking more questions, handling more claims, etc) which obviously costs money but in return consumers should be happier with a more secure policy which protects them from the dreaded "material fact" rejection - my only concern in the possible rise in premiums.

You never know, this may even help the "insurers will try an get out of anything" view that most people have and give the industry a better name - wishful thinking me thinks :rolleyes:

[jeffrey]

On 17 May this year, the Consumer Insurance (Disclosure and Representations) Bill began progress through Parliament.
See:
a. http://www.justice.gov.uk/lawcommission/areas/consumer-insurance.htm (Law Commission announcement); and
b. http://www.publications.parliament.uk/pa/bills/lbill/2010-2012/0068/2012068.pdf (the Bill itself).