Airmic drags disclosure law into 21st century

Airmic chief executive John Hurrell is proposing a major overhaul of UK insurance law to stop insurers refusing to pay claims when insurance buyers fail to disclose certain facts through error or misunderstanding.

Speaking at the 2010 Airmic conference at the Manchester Central on Tuesday, Hurrell described the proposals as “a new way of doing business, suited to the 21st rather than the 19th century”.

It comes after Airmic revealed that non-disclosure accounted for a third of all claims that members have had declined in the past two years, according to a recent member survey.

Hurrell claimed that, as the concern about insurer security reduces, the spotlight is now focused on whether claims made in good faith will get paid, and said there was little value in having an insurer if a claim is avoided on a technicality.

“We’re not talking here about people who have deliberately withheld relevant information. The legal framework is more than a century old and places an impossible burden on the buyer,” he said. “The system would be totally unworkable were it not for the flexible and fair-minded attitude that insurers adopt most of the time.”

Airmic’s focus is to change the Marine Insurance Act of 1906, which requires buyers to share information about anything a “prudent insurer” would consider relevant. A failure to do so allows the insurer to refuse all claims under the policy or avoid the policy completely.

“The UK has the most customer-hostile disclosure legislation in any major western country and it risks undermining confidence in the insurance promise.

Our proposals are also in the interests of the London market,” he said.

Airmic is now planning to send a guide to members in the autumn with three main objectives: to eliminate innocent non-disclosure as a reason for avoiding a claim; to define where knowledge rests within an organisation; and to ensure proportionality of penalty where there has been non-disclosure.

The association has also held talks with its insurer partners about the insertion of side agreements and clauses into contracts. Hurrell said the feedback had been “overwhelmingly understanding and supportive, but inevitably this is going to take time”.