The last piece in the Law Commission’s mammoth review on insurance contract law in the UK was set in motion 26 June 2012 — and the proposed changes, likely to be enacted by the end of 2013, promise to alter significantly the insurance and reinsurance landscape in the UK.
The final piece came in the form of a consultation paper entitled “Insurance Contract Law: The Business Insured’s Duty of Disclosure and the Law of Warranties.” Responses to the various proposals set out in this last consultation must be provided to the Law Commission by 26 September 2012. Thereafter, the Law Commission will publish a final report and a draft Bill, which should complete the insurance law project by the end of the following year.
This last consultation comes at the back of a new law on consumer insurance contracts: the Consumer Insurance (Disclosure and Representations) Act 2012, which was enacted on 8 March 2012, and which will change drastically the way insurance for consumers is conducted in the UK. Indeed, the Act, among other things, replaces the duty to volunteer information with the duty not to misrepresent. Further, the remedies available to insurers in case of a misrepresentation on the part of the consumer have changed. In short, an insurer will no longer be able to avoid a contract for misrepresentation.
The Law Commission would like a similar regime to apply to business insurance. Accordingly, disclosure and risk presentation in the context of business insurance would be a reciprocal process whereby the insured would make a fair presentation of the risk and the insurer would communicate what it wishes to know by way of appropriate questions. As in consumer insurance, the Law Commission seeks to overhaul the remedies available to insurers (and reinsurers) should the insured misrepresent the risk. The Law Commission aims to implement these proposals through statute and also intends these proposals to cover marine insurance and reinsurance.
For a detailed look at the Law Commission proposals for business insurance and at the Consumer Insurance (Disclosure and Representations) Act 2012, read our briefing note here:
Overhaul on the Horizon – Impact of the Law Commission Reform on UK Insurance Contract Law