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

4.212 However our view is that this issue can be dealt with by the general principles
outlined above. Earlier we proposed that general questions should be permitted,
but that the court should ask whether a reasonable consumer would understand
that the question was asking about the particular information at issue. We think
that in the case of the many general questions asked at renewal, consumers
may, quite reasonably, have little idea of what the question is asking about. We
are confident that judges and ombudsmen will apply this test appropriately in the
circumstances. In the meantime, we hope that insurers will look hard at their
renewal forms, bearing in mind that if their questions are inappropriately vague or
wide, they can expect little redress if consumers do not tell them what they want
to know.
4.213 Information to be provided by the insured at renewal is therefore not an issue
about which we make a specific proposal.
MANDATORY RULES
4.214 Should the new law be mandatory, in the sense that the parties would not be free
to vary it by adopting different policy terms, or only default rules that will apply in
the absence of agreement to the contrary?
4.215 For consumer insurance, the parties are not in any case completely free to vary
the rules, unless the change is in the insured’s favour. This is because of the
Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR). 96 As we
explained in Part 2, unless the term had been individually negotiated, almost any
term that purported to alter the rules we propose would be subject to review on
the grounds of fairness. The rules would thus be at least “semi-mandatory”.
4.216 However, we think that the basic rights that are discussed in this Part so far
should be mandatory, just like the requirements of the FSA Rules. This is for
three reasons:
(1) the rights conferred are so basic that no consumer should be deprived of
them;
(2) even if, in principle, a fully-informed consumer should be able to waive
his or her rights, the number of consumers who would be both sufficiently
informed and wish to give up their rights is so small that it is simpler to
have one rule for all; and
(3) having mandatory rules is simpler for the industry and avoids the risk of
less scrupulous insurers undercutting the more scrupulous by offering
cheap policies that offer less protection in ways that the buyers will not
understand.
4.217 Consumer rights in relation to the quality of goods are mandatory; we think that
so far as possible, the same should be true in relation to insurance. When we
discussed this issue at seminars there was general agreement that the rules
should be mandatory in this sense.
96
Unfair Terms in Consumer Contracts Regulations 1999, SI 1999 No 2083. See para 2.72
above.
116