News Review: General Insurance
Consumer Insurance Bill blows change in the air
by Kevin Paterson, sales & marketing director, Assurant Intermediary
a proposed change in legislation is set to be the first shake-up of one of the main principles of insurance since 1906. ubberimae Fides is the
concept of utmost good faith. this principle requires that all parties engaged in the negotiation regarding the establishment of an insurance contract must disclose all relevant information – material facts in other words – to all the other parties. instead of parties only having to give information that they are directly asked about, there is a positive duty of disclosure where the parties must volunteer the information even if not asked. Put simply, an insurance
company relies on the utmost good faith of the consumer to disclose all information available regarding what is to be insured whether it is a car, a home or a mortgage. not disclosing all the facts or misrepresenting information gives the insurance company the right to cancel the contract. now it looks like the playing
field is about to be levelled. the
consumer
insurance (disclosure and representations) Bill will change the relationship between consumers and insurance providers. the proposed reforms will mean that the responsibility to provide all relevant information regarding a risk
will shift from the consumer to the insurer. if passed into law, the
onus will be on insurers to obtain specific information about a customer by asking relevant or specific questions. the changes will mean that insurers will no longer be able to avoid paying claims merely because of accidentally inaccurate or misleading statements made by consumers. under existing consumer
law, defined by the marine insurance
act 1906,
consumers are treated the same regardless of whether they withheld information innocently or fraudulently. this allows insurers to repudiate any claim that involves a consumer withholding information – even if that information may not have been asked for or may not have appeared relevant or the consumer may not have really understood what was being asked. critics of the existing legislation argue that the wording gives less reputable insurers an excuse to avoid paying reasonable claims. the changes have, in my
view, positive implications for payment protection insurance – namely the end of underwriting at point of claim which still prevails amongst the majority of PPi propositions currently available in the marketplace. if passed into law, the
Bill will lead to a need to capture full risk data about customers at the point of sale, meaning that continuing the traditional approach to underwriting PPi insurance will be out of the question.
18 mortgage introducer JULY 2011
and not a moment too soon if you ask me. the Financial ombudsman
Service annual review published in may revealed that 51% of new cases were about the sale of payment protection insurance with the number more than doubling to 104,597 on the previous year. the review said that
these were dominated by complaints about the sale and suitability of PPi. underwriting at point of sale establishes eligibility and suitability upfront and removes the ambiguity that hovered around the historical point of claim approach. it should also result in the
end of declinature-based underwriting,
an accident, sickness and unemployment
in which insurer
decides what it does not want to insure and relies on claims decline clauses. this is another positive move as i believe there are still some insurers who effectively hide behind the principle of caveat emptor – let the buyer beware. insurers in general
appear to support the Bill. the association of British insurers has been quoted in the insurance media as saying: “We are optimistic that this Bill will introduce into law what is already seen as best practice among the majority of insurers who strive to treat their customers openly and fairly. By making such good practice common, the Bill will bring greater transparency and certainty, and improve consumers’ faith in the insurance industry.” the British insurance association,
Brokers’
however, is seeking clarity as to the broker’s responsibility when collecting pre-contract information as the insurer’s agent. it has written to the government to make the point that brokers are the principal agent of the customer – particularly as they are collecting information to search the whole market, and not for a specifically named insurer. So while there is a way
to go yet, i believe this Bill represents a positive step forward for the insurance industry as a whole, particularly in the payment protection insurance market as it starts to rebuild trust and confidence amongst consumers.
A long dry summer despite the showers that made June feel more like april, 2011 has been a record dry year – and that means the threat of subsidence has increased. the South east in particular could be affected, as a significant percentage of subsidence damage is due to shrinking clay soil, commonly found in this part of the country. trees and hedges planted
too near to buildings take moisture from the soil, extending their roots and causing the ground to shift and the building’s foundations to crack. other contributing factors are blocked or damaged drains which may leak water and wash away soil. the cost of repairs
can spiral. So take the opportunity now to remind your household clients to have appropriate cover.
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