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

9.105 If the intermediary is authorised, a consumer or small business is able to pursue
a complaint against them to the FOS. If the intermediary becomes insolvent, the
consumer or small business may enforce the court or FOS award either against
the intermediary’s insurer or against the Financial Services Compensation
Scheme (discussed below). If the intermediary is an appointed representative,
the policyholder may pursue a claim or complaint against the representative’s
principal. 74
9.106 Not all intermediaries will be covered, as some will fall within the exemptions. The
most extensive exemption is for travel operators arranging travel insurance and
for product retailers arranging product insurance. If, for example, a small travel
agent mis-sells travel insurance, a consumer will not be able to complain against
them to the FOS. However, travel or product insurance rarely involves lengthy
proposal forms: in our survey of FOS cases involving misrepresentation and nondisclosure
issues, only 3% concerned travel insurance. Travel insurance is much
more likely to lead to disputes about exclusions in the policy terms, 75 but that
raises other issues. We are not aware of any cases where consumers have been
unable to bring complaints against travel agents or product retailers who have
filled in proposal forms incorrectly.
9.107 Professions or businesses that give incidental information about insurance
products are not meant to fill in forms or give advice about how to fill in forms. It is
always possible that some will overstep the mark, and give advice that they are
not meant to give. Where a vet exceeds their authority and mis-advises a
consumer about how to fill in a form about pet insurance, the consumer would
have no recourse to the FOS. However, we are not aware that this is a problem
in practice.
FSA requirements
9.108 The FSA Rules require agents to disclose certain matters to their customers
before concluding an initial insurance contract with them. The matters which must
be disclosed include:
(1) whether the firm is authorised and regulated by the FSA, or whether it is
an appointed agent for another principal which is authorised and
regulated by the FSA;
(2) details of any holding in the insurer, if this constitutes more than 10% of
the voting rights or capital of the insurer; and
74 Under section 39(3) of the Financial Services and Markets Act, “the principal of an
appointed representative is responsible, to the same extent as if he had expressly
permitted it, for anything done or omitted by the representative in carrying on the business
for which he has accepted responsibility”.
75
In our survey of 50 FOS cases involving disputes about policy terms, 14 (28%) involved
travel insurance – the largest category in the survey: see Issues Paper 2, Warranties,
Appendix B.
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