Overview

This Insurance Bill [HL] aims to reform UK insurance law, primarily focusing on improving fairness and transparency in insurance contracts, particularly concerning the duty of fair presentation and the handling of fraudulent claims. It also amends the Third Parties (Rights against Insurers) Act 2010.

Description

The bill makes significant changes to the law governing insurance contracts, impacting both consumers and businesses. Key aspects include:

Duty of Fair Presentation:

Establishes a clear "duty of fair presentation" for insureds when applying for non-consumer insurance. This requires the insured to disclose all material circumstances they know or ought to know, or provide sufficient information for the insurer to make further enquiries. The bill details the responsibilities of both the insured and the insurer concerning knowledge of material circumstances.

Warranties and Other Terms:

Abolishes the rule that a breach of warranty automatically discharges the insurer's liability. Instead, the insurer's liability is affected only for losses occurring after a breach and before it's remedied, with exceptions for changed circumstances, illegality, or waiver.

Fraudulent Claims:

Clarifies and strengthens the remedies available to insurers for fraudulent claims, allowing them to avoid the contract, recover payments, and refuse future liability.

Good Faith and Contracting Out:

Abolishes the "utmost good faith" principle for insurance contracts, replacing it with a statutory framework. It also limits the extent to which insurers can contract out of the bill's provisions, particularly for consumer contracts.

Amendments to the Third Parties (Rights against Insurers) Act 2010:

Grants the Secretary of State the power to amend the definition of "relevant person" in the Act, particularly in cases involving insolvency or dissolution of a company, allowing for adjustments to the transfer of rights under the Act.

Government Spending

The bill's financial implications are not explicitly stated in the provided text. The changes may indirectly affect government spending through changes in insurance market practices and potential litigation costs, but no quantifiable figures are given.

Groups Affected

• Insurers: The bill significantly impacts insurers' rights and obligations, particularly regarding the duty of fair presentation, handling of fraudulent claims, and contracting out.
• Insureds (Businesses): Non-consumer insureds face new obligations regarding the duty of fair presentation and have a modified approach to warranties.
• Insureds (Consumers): Consumer insureds benefit from strengthened protections against unfair contract terms and the abolition of the utmost good faith principle.
• Third Parties: Changes to the Third Parties (Rights against Insurers) Act 2010 may affect the rights of third parties to claim against insurers in certain circumstances, particularly involving insolvency or company dissolution.

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