I don’t cover stories here if I think they are likely to appear prominently in the national press. That was why I didn’t write about the Law Commission’s important recommendations today for reforming consumer insurance law.
If implemented, the proposals will benefit us all – even if we happen to be insurance companies. So you might have thought they would have merited a mention in today’s news pages.
The legislation under which we insure our homes, our cars, our health and our holidays was passed more than 100 years ago for the benefit of ship-owners.
The Marine Insurance Act 1906 allows insurance companies to avoid paying out if we, as policyholders, have failed to disclose any relevant information — even though we may not know what information the insurer regarded as relevant and even though we have answered questions honestly and reasonably. True, most insurance companies behave responsibly. But the Law Commission report provides plenty of examples of those that don’t.
The commission and its Scottish counterpart recommend that the consumer’s duty to volunteer information to an insurer should be abolished. Instead, insurers would have to ask whatever it is that they want to know. Consumers would have to take reasonable care to ensure that the information they give is not misleading.
Whether the incoming government takes up the draft Bill published by its advisers on law reform depends largely on whether the insurance industry chooses to support it. Until recently, the Association of British Insurers has supported the principles behind the reforms while arguing that the results could best be achieved in some sort of non-statutory way.
This is clearly absurd. If it is a bad law, it should be abolished – whether or not some insurers want to keep it as a “get-out-of-paying-up” card. But what reactioon do we receive from the Association of British Insurers? Their representative at the Law Commission briefing yesterday, a woman called Charlotte, said: “We do support the reforms going forward and I don’t think we will be opposing them.”
But the industry’s official response was to remain sitting firmly on the fence.
Nick Starling, Director of General Insurance and Health at the association, said:
We share the Law Commission’s desire that customers should be treated fairly. The insurance industry is committed to ensuring that customers understand their rights and obligations, and have their genuine claims paid quickly. We are pleased that the Law Commission recognises that best practice throughout the industry, supplemented by FSA regulation and the approach of the Financial Ombudsman Service, already protects the consumer. The Commission’s proposals give legal status to existing best practices, and bring them together in one place in a clear format.
What Starling didn’t say was whether his association supported the proposals. It is time he did so.