The Law Commission’s proposals to reform insurance contract law won the support of the vast majority of brokers, insurers and consumer groups that responded to its consultation paper as well as the Financial Ombudsman Service.
In a nut shell the proposals would bring the law into line with the FOS’s approach to handling claims. It wants to abolish consumers’ legal duty to volunteer information, protect those who act honestly and reasonably and give insurers proportionate remedies for negligent misrepresentations.
Of the 39 insurers and reinsurers that responded, only four did not support updating the law. But the ABI argued strongly against reform stating that “there is no widespread evidence of consumer detriment and the need for reform is therefore not evident”. The trade body encourages insurers to follow the FOS approach in guidelines introduced in January but does not believe this should be written in law.
The news comes three months after Lifesearch research showed that only 6 per cent of life offices and reinsurers thought the ABI was doing a good job representing its members.
Scottish Re UK & Ireland chief marketing officer David Heeney says: “It is surprising to have what appears to be a weight of insurers differing in view from what their trade body is saying.”
Royal London head of corporate affairs Gareth Evans says: “It looks odd the vast majority of insurers’ responses are positive and the trade body says something different.”
ABI spokesman Jon French says: “Things have moved on and the fact we have introduced new guidelines has made a lot of what the Law Commission was proposing pretty irrelevant. We live in the real world where insurers have to be able to adapt with the changing environment. The ABI and its members have consistently argued that principle-based guidelines are the way to go.”
In other news, the protection industry is whooping after the Competition Commission announced it was considering banning the sale of Payment Protection Insurance at the point of sale of a credit product.
The CC is also considering introducing a price cap as a temporary measure to reduce prices and has proposed a ban on single premium policies.
Its report into the sale of PPI found consumers are being overcharged more than £1.4bn a year, surprise surprise! It says companies face little or no competition when selling the product to their credit customers and consumers rarely shop around for the best deal, allowing banks, mortgage providers and credit providers to rip them off.
But will PPI’s deserved bad press rub off on quality protection products such as income protection? The industry needs to take the opportunity to differentiate itself or risk being tarred with the same brush.