The protection industry is broadly supportive of the Law Commission’s plans for insurers to pay claims even if policyholders fail to make disclosures but concerns have been raised that policy costs could rise as a result.
In a joint report with the Scottish Law Commission, the Law Commission is proposing that people who take reasonable care to answer insurers’ questionsfully and accurately can expect a full payout.
Bright Grey and Scottish Provident proposition director Roger Edwards says: “It is effectively making a true law out of the guidelines that the Association of British Insurers drafted, which have already been adopted, so I think insurers are very much in favour.”
ABI director of general insurance Nick Starling says: “We are pleased the Law Commissions’ proposals to reform the law are very similar to recent codes and best practice which ensure that customers are treated fairly.”
But Munich Re UK Life head of claims Alex Isted says the changes could affect the pricing of products as more claims may be paid. He adds:
“The industry may have to review its underwriting processes and procedures.”
Lifesearch senior policy adviser Matt Morris says the ABI has already dealt with the problem so the new proposals are largelyunnecessary. But he adds: “Advisers could record telephone calls. If they are recorded, then you have evidence that you asked all the right questions.”
Highclere Financial Services partner Alan Lakey says: “The risk here is creeping consumerism where the Law Commission assumes the consumer is always right. The proposals also highlight the need for a wet signatureand teleunderwriting as they remove the adviser from an argument over non-disclosure.”