Overview

This bill aims to reform the law on disclosure and misrepresentation in consumer insurance contracts in the UK. It replaces the existing "utmost good faith" principle with a duty of reasonable care on the consumer, setting out specific remedies for insurers in cases of misrepresentation.

Description

Main Definitions

The bill defines "consumer insurance contract" as one between an individual (not acting in a business capacity) and an insurer. "Consumer" refers to the individual, and "insurer" to the insurance company.

Pre-contract Information

The bill introduces a duty of reasonable care for consumers to avoid misrepresenting information to the insurer before a contract is made or varied. Failure to comply with an insurer's request for information is also considered a misrepresentation.

Reasonable Care

The level of reasonable care is judged based on the circumstances, considering factors such as the type of insurance, insurer's clarity of questions, and whether an agent acted for the consumer. Dishonest misrepresentations always show a lack of reasonable care.

Qualifying Misrepresentations

An insurer can only take action against a consumer for misrepresentation if it was a breach of the duty of reasonable care and the misrepresentation affected the insurer's decision to enter into the contract or affected the terms of the contract. These are called "qualifying misrepresentations" and can be classified as deliberate/reckless or careless.

Remedies for Misrepresentations

The bill outlines the insurer's remedies depending on whether the misrepresentation was deliberate/reckless or careless. Deliberate/reckless misrepresentations may allow the insurer to avoid the contract and refuse claims without returning premiums, while careless misrepresentations may lead to avoidance of the contract, altered contract terms, or proportional reduction of claim payouts. The bill provides further detail regarding group insurance, life insurance on another, and the role of agents.

Contracting Out

The bill prevents insurers from using contract terms to place consumers in a worse position than that provided by the act.

Repeal and Amendments to Existing Acts

The bill repeals relevant sections of the Marine Insurance Act 1906 and amends parts of the Road Traffic Act 1988 and the Road Traffic (Northern Ireland) Order 1981.

Government Spending

The bill doesn't directly specify government spending. The impact is likely to be indirect, related to potential changes in litigation costs and regulatory oversight of the insurance industry.

Groups Affected

• Consumers: The bill affects consumers purchasing insurance by shifting the responsibility for accurate information and introducing potential consequences for misrepresentation.
• Insurers: The bill alters insurers' rights and remedies in cases of misrepresentation, potentially affecting their profitability and risk assessment processes.
• Insurance Agents: Their role and liability are clarified, potentially impacting their business practices.
• Courts: The bill introduces new legal standards and procedures for resolving insurance disputes.

Powered by nyModel