Airmic welcomes Law Commission proposals to reform insurance law
Law Commission supports insurance law reform as report warns that insurance failings a threat to UK recovery
Association website to host insurance law reform resource
The Law Commission’s third and final consultation paper on the subject proposes a more even-handed approach to insurance law, making it more difficult for insurers to void claims on grounds of non-disclosure. It also proposes penalties for late payment of claims.
“The duty [of disclosure] is unclear and sometimes poorly understood, while the consequence of breach is too harsh. There is evidence that the duty does not work well in practice,” said the Law Commission in a statement launching the consultation.
Airmic has argued for several years that the 1906 Marine Insurance Act, which governs all UK insurance law, places an impossible burden on buyers. A failure to disclose a single piece of material information – even if not requested by the underwriter and irrelevant to a claim – can result in the whole policy being voided.
Speaking at a seminar organised by the British Insurance Law Association, Airmic chief executive John Hurrell gave strong backing to the proposals.
The insurance industry’s response was more muted. “It [the Law Commission paper] may have significant ramifications for the way that insurers conduct their business. We will consider these proposals carefully,” said Maggie Craig of the Association of British Insurers.
She went on to welcome, with some qualifications, the proposed penalties for late payment of claims, as did another insurance speaker at the seminar, Mike Noonan of QBE. Kees van der Klugt of the Lloyd’s Market Association expressed opposition, however, warning that the change might lead to an increase in speculative claims and higher premiums for Airmic members.
Poor governance and insurance failings a threat to recovery – MacTavish
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Among those to speak from the floor, MacTavish ceo Bruce Hepburn described speed of payment as “a massive issue”. He said it was “far more important to policyholders than at any time in the past 106 years.”
This was, he said, partly because the arrival of contract certainty had enabled a more legalistic approach to claims payment and partly because banks were no longer as willing to make bridging loans on acceptable terms.
A report from MacTavish, published on the same day, warned that poor governance and insurance failings are a threat to recovery in the manufacturing and engineering sectors.
“Legal reform is overdue, and the reliability of insurance policies in responding to major events is in sharp decline. But the law alone will not solve the problem - companies need to do a lot more to play their part and the thrust of reform is that company practices need a total rethink,” said MacTavish.
“The duty [of disclosure] is unclear and sometimes poorly understood, while the consequence of breach is too harsh. There is evidence that the duty does not work well in practice”
Law Commission
