Many of the principles of insurance law date back to the Marine
Insurance Act from 1906. "We have concluded that some principles
embodied in the 1906 Act are no longer appropriate to a modern
insurance market, and do not meet policyholders’ reasonable
expectations," said the Commission's consultation document on
reform.
Reform was previously proposed as far back as 1957, and the
original Marine Insurance Act has been modified by what the
Commission says is a confusing muddle of codes, Financial Ombudsman
rules and agreements from the insurance industry not to apply all
their legal rights in full.
"In our view, the existence of the Ombudsman should not be
regarded as a substitute for law reform," said a Law Commission
statement. "The present position is increasingly incoherent, with a
growing gulf between the unsatisfactory law on the one hand, and a
patchwork of codes, rules and Ombudsman principles on the other. We
are also conscious of the fact that there are policyholders –
including some in vulnerable classes – who are less likely to make
use of the service offered by the Ombudsman, and may therefore face
the full rigour of the law."
The Commission has issued a consultation on changes to the law
relating to misrepresentation and non-disclosure, breach of
warranty and intermediaries and pre-contract information.
The reform proposed includes introducing special terms into
standard term contracts, because there is no equivalent in business
insurance to consumer legislation protecting buyers against unfair
terms in contracts.
The consultation is being run by The Law Commission and The
Scottish Law Commission and the closing date for submissions is
16th November.
