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Insurance Contract Law: Consumer Insurance (Disclosure and Representations)
The Law Commission and the Scottish Law Commission recommend the creation of a new consumer statute setting out what a consumer should tell their insurer before taking out insurance.
The current law requires consumers to volunteer information about everything which a “prudent insurer” would consider relevant.
They think this duty should be abolished. Instead, insurers should be required to ask questions about what they want to know.
The current law is set out in the Marine Insurance Act 1906 (“the 1906 Act”) which is based on eighteenth and nineteenth century principles.
The law imposes a duty on consumers to tell insurers anything which would “influence the judgment of a prudent insurer” in fixing the premium or deciding whether to take the risk.
The problem is that most consumers have little idea of what might influence a prudent insurer.
Yet the penalties for failure to disclose information to insurers are harsh.
If a consumer fails to disclose material information, the insurer may treat the policy as if it does not exist and refuse all claims under it.
