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

When the insurance intermediary informs the customer that he gives
his advice on the basis of a fair analysis, he is obliged to give that
advice on the basis of an analysis of a sufficiently large number of
insurance contracts available on the market, to enable him to make a
recommendation, in accordance with professional criteria, regarding
which insurance contract would be adequate to meet the customer's
needs.
10.31 We would welcome views on whether the same test should be used for the
purposes of distinguishing between insurer’s agents and insured’s agents. In
other words, should only those intermediaries conducting a fair analysis of the
market be treated as the consumer’s agent? The advantage of aligning the tests
in this way is that it is simpler: the distinction already exists (albeit for other
purposes) and customers must be told whether the intermediary is providing a
fair analysis. On the other hand, it has been pointed out that offering independent
advice is not the same as ensuring a proposal form is filled in correctly. An
intermediary may offer independent advice but then become the insurer’s agent
for the purposes of binding the insurer to cover. Alternatively, an intermediary
may act for a consumer in completing a form without necessarily offering advice
on which product to buy.
10.32 We ask if the test for whether an intermediary is independent and acts as
the consumer’s agent should depend on whether the intermediary searches
the market and conducts “a fair analysis”, as defined by the Insurance
Mediation Directive.
10.33 As discussed above, we have considered whether special protection is needed
for those dealing with intermediaries who are exempt from FSA regulation, such
as travel agents selling travel insurance, 7 product retailers selling product
insurance or businesses wrongly giving advice about incidental products. Our
current view is that no additional protection is required. The issue does not
appear to cause problems in practice, as (for example) it is rare for travel
insurance to be avoided for non-disclosure or misrepresentation. Furthermore,
product retailers and travel agents rarely carry out a fair analysis of the market,
so they will usually be considered as agents for the insurer in any event.
However, we would welcome views on this.
10.34 We ask whether any additional protection is necessary when consumers
have been given bad advice about completing proposal forms by
intermediaries who are not subject to FSA regulation?
7 On 26 June 2007, as this report was going to press, the Treasury announced that the sale
of travel insurance alongside a holiday would be regulated by the FSA: see http://www.hmtreasury.gov.uk/newsroom_and_speeches/press/2007/press_71_07.cfm.
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