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 consumers, while setting out clear remedies for insurers in cases of misrepresentation.

Description

Key Definitions:

The bill defines "consumer insurance contract" as one between an individual (mainly for non-business purposes) and an insurance business. "Consumer" refers to the individual, and "insurer" to the business.

Consumer's Duty:

The bill establishes a consumer's duty to take reasonable care not to misrepresent information to the insurer. This replaces the previous "utmost good faith" requirement. The level of reasonable care considers factors like the contract type, insurer's questions' clarity, and whether an agent acted for the consumer. Dishonest misrepresentations automatically show a lack of reasonable care.

Insurer's Remedies:

Insurers can only pursue remedies if a misrepresentation was made in breach of the consumer's duty, and the insurer wouldn't have entered the contract (or varied it) without the false information. Remedies depend on whether the misrepresentation was deliberate/reckless or careless and include contract avoidance, premium retention, claim refusal, and proportional claim reduction. Specific rules apply to group insurance and life insurance on another's life.

Other Provisions:

The bill prevents converting representations into warranties, addresses group insurance scenarios, clarifies agent responsibilities (through Schedule 2), prohibits contracting out of the bill's provisions, and repeals conflicting provisions in existing Acts such as the Marine Insurance Act 1906 and the Road Traffic Act 1988.

Government Spending

The bill does not directly specify government spending. The impact on government spending is indirect and likely minimal, relating to potential legal costs associated with changes in consumer protection legislation, but no figures are provided.

Groups Affected

• Consumers: May face a changed standard of disclosure in insurance applications; they will need to take reasonable care. If they make misrepresentations, they could face consequences detailed in the bill.
• Insurers: Will have clearer legal grounds for pursuing remedies against consumers who make misrepresentations. Their processes and claims handling may need updating to reflect the new law.
• Insurance Agents: Their status as either consumer or insurer agents will be determined based on the rules within the bill, impacting their liabilities and responsibilities.

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