Misrepresentation, Non-Disclosure and Breach ... - Law Commission

4.206 In Part 3 we identified one potential pitfall peculiar to renewals – the question
which simply asks the policyholder whether there has been any change in
circumstances. 95 If the policyholder has not retained or been given a copy of any
information previously supplied to the insurer, it may be hard to answer such a
question accurately.
4.207 We agree with the FOS that good practice dictates that if an insurer wants to ask
such a question, it should send the insured copies of all the information
previously provided.
4.208 In Issues Paper 1 we asked whether we should build this practice into the law.
We considered whether the statute should provide that insurers should lose their
rights to rely on non-fraudulent misrepresentations made in response to such
questions unless copies of previous answers have been provided. We thought
that the copies could be provided in one of two ways – either as paper or
electronic duplicates of the original documents, or as paper or electronic output of
data stored on an insurer’s computer systems, having been extracted from the
original documents.
4.209 This suggestion provoked mixed responses. One major insurer supported it. It
explained that for some general insurance business, it has started to provide
consumers with a one page document showing ‘material facts’ they hold in
relation to the policy.
4.210 Other insurers opposed the suggestion strongly on the grounds that it would add
to administrative costs on renewals. We were surprised by some of the
arguments put forward. For example, one insurer described the proposal as
“inoperable in practice”. It said that where insurance companies have merged
and IT systems have changed, the insurer would not have access to the initial
application form. However, it seems likely that important facts, such as that a car
is parked on the street and not in a garage at night, will be noted somehow on the
insurer’s records of the policy. The insurer must have access to these or it will not
be in a position to issue a renewal notice. Furthermore, if the insurer cannot find
out what was on the previous proposal form, we question whether the insured
can reasonably be expected to do so.
4.211 General questions at renewal stage may be particularly confusing. In answering
whether anything has changed, the insured needs to know what sort of matters
the insurer wishes to know about and this is often far from clear. For example, a
policyholder will not know whether the insurer thinks a household insurance claim
is relevant to a motor policy, or whether the insurer wants to know about their
injury in a cycling accident. We are concerned by a recent practice which charges
policyholders for notifying changes, and so discourages them from mentioning
things that “are probably not important”. We think that insurers could be much
more specific about what policyholders are expected to mention at renewal.
95 See paras 3.37 to 3.38.
115