The ABI urges the market to make a success of regulation and warns that more law is unlikely to help consumers.
Imposing more law on the insurance industry is "unlikely" to help customers, the ABI has warned.
Commenting on the publication of the Law Commission's first consultation paper, as part of its ongoing review of insurance contract law, Stephen Haddrill, the ABI’s director general, said: “The insurance industry is closely and effectively regulated by the FSA. The industry also set up and supports an Ombudsman service that enables customers to settle disputes without going to court.
“More law is unlikely to provide a better deal for customers. The real challenge is for the industry and the FSA to make a success of principles-based regulation."
He added: “We will scrutinise the Law Commission's proposals to ensure that they add real value to the regulatory system; are themselves principles-based, not prescriptive; and do not distract from the efforts already underway to modernise regulation.”
“More law is unlikely to provide a better deal for customers. The real challenge is for the industry and the FSA to make a success of principles-based regulation.
Stephen Haddrill, ABI’s director general
The consultation paper on misrepresentation, non-disclosure and breach of warranty by the insured, draws together the contents of, and responses to, the Commission's three issues papers published on the subjects.
The Law Commission aims to rectify the problem of the law not being in line with the reasonable expectations of the market, concentrating on the position of the consumer while at the same time making proposals for businesses.
"Among the proposals, the Law Commissions recommend that insurers must ask clear questions about what they actually want to know and have removed the overriding duty for consumers to disclose information," explained Richard Evans, partner and head of the Policy Coverage Unit at Beachcroft LLP. "The aim is to ensure that consumers are not penalised where they act reasonably and honestly.
"Significantly, it is also proposed that, even where a misrepresentation or non-disclosure has been made, insurers will only be able to avoid the contract where the insured was deliberate or reckless. In circumstances of negligently withheld/misrepresented information, where currently insurers are able to avoid, a proportionate remedy will apply."
