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

NATIONAL CONSUMER COUNCIL REPORT 1997
A.44 In 1997 the National Consumer Council ("NCC") published a report written by
Professor John Birds, then of Sheffield University, which considered the impact
of insurance law on consumers:
Almost every household in the country regularly buys personal
insurance of one kind and another, to safeguard the value of their
personal belongings, home, income, health, travel and so on, in case
of crime, accident or other disaster. And every time they buy – or
renew – a policy, the transaction is governed by law that has
remained largely unchanged for hundreds of years. Large parts of
that law, it is widely acknowledged, are heavily biased against the
interests of consumers.
A.45 The NCC took into account the 1986 Statements of Practice but concluded that
there were still areas "where consumers are manifestly still at risk". It
recommended reform in a range of areas:
We conclude that the only effective solution to some of the serious
problems encountered by consumers when it comes to buying
personal insurance is legislative reform.
A.46 With regard to misrepresentation and non-disclosure, the NCC made a series of
recommendations.
The test of materiality
A.47 The NCC recommended that a consumer should be required to disclose those
facts within the consumer's knowledge which either the consumer knows to be
relevant to the insurer’s decision or which a reasonable person in the
circumstances could be expected to know to be relevant.
A.48 It also recommended that an untrue statement should not be treated as a
misrepresentation if the applicant honestly believed it to be true.
Remedies
A.49 The NCC recommended that avoidance should continue to be available as a
remedy for fraudulent misrepresentation or non-disclosure.
A.50 For other cases, the rights of the insurer would depend on the action the insurer
would have taken had it known of the true facts:
(1) If the insurer would have declined to offer cover, it should be entitled to
avoid the policy.
(2) If the insurer would have offered cover, it should retain liability under the
policy but should be entitled to deduct the extra premium it would have
charged had there been no non-disclosure or misrepresentation.
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