ProtectionJul 21 2014

Insurance Bill to usher in a ‘modern legal regime’

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The government has put an insurance bill before parliament to address what the government has described as “serious shortcomings in the legal framework”.

The 13-page Insurance Contracts Bill, which stems from recommendations made to the government by the Law Commission and the Scottish Law Commission, follows eight years of consultation with businesses and insurers.

The reforms cover three main areas: Disclosure and misrepresentation in business and other non-consumer insurance contracts; abolishing the basis-of-the-contract-clause that converts pre-contractual information into warranties without discussion; and providing “robust remedies” for insurers in the event of a fraudulent claim.

According to Andrea Leadsom, economic secretary to the Treasury, the new bill will bring in a “more modern legal regime”, which will benefit both insurers and their business customers.

The bill aims to increase transparency and certainty over the rules that govern contracts between them and thereby reduce the number of legal disputes over time.

Ms Leadsom said: “Britain’s insurance industry is a major success story, employing more than 300,000 people across the country, helping millions of British people and businesses every day and exporting across the globe.

“We want the industry to continue to grow and provide better services to customers, which is why we need to bring insurance contract law into the 21st century.”

Reaction round-up

John Hurrell, chief executive of Airmic, the UK’s risk management trade body, said: “The UK is unique among advanced economies in that our current legal framework potentially penalises the purchaser of commercial insurance and creates uncertainty over whether policies bought in good faith will pay out in the event of a claim. The new insurance bill will be good for business and help to maintain confidence in the London insurance market.”

Maurice Tulloch, chief executive of Aviva UK & Ireland GI said: “We’ve been pushing for contracts to be easier to understand and provide greater clarity for customers. Underpinning this is reform of insurance law to make it more relevant for today’s businesses. The Bill is a welcome development that will deliver significant benefits to both customers and the industry, helping make the UK a great place to do business.”

Colin Parkin, director of Lincoln-based Ample Financial Services said: “It is a good thing to see the new Insurance Bill being introduced, the old rules need to be updated, it is a positive move which will make things easier on issues regarding disclosure and misrepresentation. I think that is really important and it will definitely have a positive impact.”