Insurance Contract Law
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Reforming insurance contract law: a summary of responses to consultation
On 28 May 2008, the Law Commission published a summary of responses to its Consultation Paper. The summary document reports the arguments that have been put to us on consumer insurance reform. A further paper will deal with business insurance reform. There is a wide consensus that consumer insurance law is in urgent need of reform - not only among consumer groups, lawyers and brokers, but also among most insurance companies.
Consultation Paper 1 dealt with misrepresentation, non-disclosure and breach of warranty by the insured for both business and consumer insurance. It was published in July 2007 and responses were sent to us until January 2008. We received in total 105 responses and are very grateful to all those who gave us their views.
At a meeting on 11 June focusing on consumer insurance law, The All Party Parliamentary Group on Insurance and Financial Services considered responses to the Law Commission's' first consultation paper on the reform of insurance law. A press release is available.
The Law Commission and the Scottish Law Commission have not yet formulated their final recommendations on consumer insurance reform.
The history of the insurance contract law reform project
On 18 January 2006, the teams working on the project at the two Commissions issued a scoping paper, inviting views on which areas of insurance contract law were in need of reform. In the light of the responses they received, the teams published a joint paper giving their decisions on the scope of the project. It was decided that a first consultation paper would deal with the issues of misrepresentation, non-disclosure and breach of warranty. A second consultation paper would deal with the issues of insurable interest and post-contractual good faith (including fraud and damages for late payment of claims).
The teams then developed their preparatory thinking for this consultation paper through a series of issues papers.
Issues Paper 1: Misrepresentation and Non-Disclosure (published 22/09/06)
Issues Paper 2: Warranties (published 28/11/06)
Issues Paper 3: Intermediaries and Pre-Contract Information (published 21/03/07)
On 17 July 2007 the Law Commission published jointly with the Scottish Law Commission a Consultation Paper on insurance contract law. We invited comments on provisional proposals to modernise the law relating to misrepresentation, non-disclosure and breach of warranty by the insured. A summary of the full consultation paper is available. We are currently considering the responses to this consultation and will publish a document summarising them later this year.
In the meantime we are starting work on the second Consultation Paper on insurable interest and post-contractual good faith. As before, the teams working on the project at the two Commissions will publish issues papers setting out our preliminary thinking on the matters which will be covered by the Consultation Paper. The first of these issues papers, dealing with insurable interest, has been published.
Issues Paper 4: Insurable Interest (published 14/01/08)
Lessons from Australia
In 1984 the Australians introduced a new Insurance Contracts Act, which reformed many of the issues we are considering, including non-disclosure and warranties. Recently the Australian Treasury reviewed those reforms and prepared amendments to their legislation. We were therefore particularly interested to see what the Australians have done, and what effects it has had.
We felt that a more detailed analysis of the law in Australia would add to the debate. To that end, Professor Rob Merkin has undertaken a legal and practical analysis of the 1984 Act. His paper concentrates on misrepresentation, non-disclosure and warranties, though it also covers several issues we have not yet addressed. It highlights the successes and failures of the Australian legislation.
The paper does not make recommendations for what we should do, and is not intended as Law Commission policy.
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For more information, or to submit your views, contact the commercial and common law team. Further information is available from the team page.
NOTE - We are happy to provide information about our projects. However, we cannot give legal advice or deal with individual cases. Nor do we help with student assignments.