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

Effectiveness reviews are part of the FSA's approach seeking to
ensure that its interventions in the market make a real and beneficial
difference in practice. We are seeking to introduce more principlesbased
regulation and simplification across the FSA Handbook as a
whole in the context of our Better Regulation agenda. And the GI
effectiveness review presents a good and timely opportunity to look at
ICOB in fine detail from the viewpoint of restricting prescription to the
point where it is only demonstrably necessary to meet our consumer
protection objective.
A.70 The FSA published its interim report in March 2007. 23 The review proposes a
move towards a more principles-based and proportionate approach to general
insurance regulation. The essential consumer protections, including the detailed
rules on non-disclosure and breach of warranty, will be retained. However, the
FSA is looking at removing most of the ICOB disclosure requirements imposed
on firms that go beyond minimum EU directive requirements. The report also
proposes a small number of measures to improve the selling of personal
protection insurance policies, such as critical illness. For example, the FSA
proposes extending the cancellation period for protection policies and requiring
that customer’s attention be drawn to the importance of reading the policy
documents to check the suitability of the cover.
APPLICATION FORM DESIGN – GUIDANCE FROM THE ABI 2006
A.71 In February 2006, the ABI issued guidance to its members on the design and
wording of proposal forms for life and health insurance. This guidance, entitled
Application Form Design for Life and Health Protection Insurances (AFD) was
aimed at ensuring that all relevant information is disclosed at the application
stage:
Although not all non-disclosure arises because of faults in proposal
forms, insurers should do as much as they can to ensure that the
questions they ask are clear and unambiguous. Doing so assists the
applicant in their understanding of what is being asked of them. Thus
when completing a proposal form, they should have confidence they
are giving all the necessary correct and relevant information. This will
also reduce the burden on salespersons in explaining or interpreting
how questions should be responded to.
SLIP is now an addendum to the AFD. 24
A.72 The AFD has provisions relating to some of the problems that we identify in Part
4. It should, however, be noted at this stage that the AFD specifically states that
its provisions are not binding on insurers except where they represent the law or
the requirements of the Statements of Practice:
23 Financial Services Authority, ICOB Review Interim Report: Consumer Experiences and
Outcomes in General Insurance Markets. Available at
http://www.fsa.gov.uk/pubs/other/ICOB_review.pdf. (accessed 27 April 2007).
24 For copies of both SLIP and the AFD, see the appendices to Issues Paper 1.
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