Law Commission unveils consumer insurance report

Proposals include draft bill to replace 100 year-old legislation

The Law Commission has outlined a raft of proposals to update consumer insurance law for the first time in more than a century.

The report, drafted in conjunction with the Scottish Law Commission, is set to be presented to parliament today includes a draft bill which could replace the Marine Insurance Act of 1906.

Under the new proposals, which will formally codify a raft of regulation already in place, the duty of consumers to volunteer information to insurers would be replaced by a duty to take reasonable care to answer insurer's questions fully and accurately.

New legislation would allow insurers to strike out a claim if a policyholder makes a deliberate or reckless misrepresentation. However, an innocent misrepresentation would be likely to result in the payment of a claim whereas a negligent misrepresentation may see the policy and claim proportionately rectified.

Commenting on the report, David Hertzell, the law commissioner who is leading the project at the Law Commission for England and Wales, said: "Our reforms would improve consumer protection, increase consumer confidence and enhance the reputation of the insurance industry. They have the backing of consumer groups and the insurance industry."

Professor Hector MacQueen, the commissioner leading the project at the Scottish Law Commission, added: "Although the majority of insurers already follow industry best practice, our recommendations will require the minority to follow suit as well. We think that the clarification of the rights and duties of insurer and insured alike will reduce the number of claims which are rejected unfairly."

Nick Starling, Director of General Insurance and Health at the Association of British Insurers, said: "We are pleased that the Law Commissions' proposals to reform the law are very similar to recent codes and best practice which ensure that customers are treated fairly."

This is the third time that the issue has been tackled in the past 100 years, with the Law Reform Committee recommending reform in 1957 and Law Commission producing a similar report in 1980.