Changes to Insurance Industry Coming
The Contracts of Insurance Bill, that awaits its second reading, will make significant changes to the rights of policyholders and insurers to promote confidence in the insurance market and ensure that insurers operate fairly. The bill proposes several changes to insurance contracts legislation, including:
• Disclosure duties: The bill draws a distinction between consumer policyholders (where the insurance contract is for personal, domestic or household purposes) and non-consumer policyholders. Consumer policyholders will have a duty to take reasonable care not to make a misrepresentation to the insurer.
Non-consumer policyholders will have a duty to make a fair representation of the risk. This shifts the burden on insurers to ask the right questions to reveal all the information they need
• Unfair contract terms: The bill removes the existing exception for standard form insurance contracts from the unfair contract term provisions in the Fair Trading Act 1986. In other words, the unfair contract terms regime will apply more widely to insurance contracts, meaning insurers must make sure that the provisions of their insurance contracts are fair.
There are still some exceptions in insurance contracts that will not be subject to the unfair contract terms regime, including event, subject or risk insured, sum insured, the basis for settling claims, excess, and exclusions or limited liability in certain circumstances, and
• Proportionate remedies: Insurers will no longer be able to avoid an insurance contract for any failure or misrepresentation of a policyholder. Instead, insurers will have proportionate remedies based on how it would have responded if it had known the relevant information, such as reducing the amount paid on a claim.
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