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

Section 4 Baseline analysis of insurance markets and the extent of non-disclosure
4 Baseline analysis of insurance markets
and the extent of non-disclosure
4.1 Market characteristics and coverage
In this section we present some information on the size and coverage of the
various consumer insurance markets using a variety of measures. Specifically,
we have attempted to provide a range of measures that will allow the Law
Commission to assess the specific insurance markets that might be suitable
for a full assessment of the costs and benefits associated with the proposed
reforms.
We have gathered together some of the existing information on the
characteristics of various consumer insurance markets from a variety of
sources but it is clear that there are evidence gaps and more comprehensive
information would greatly assist the analysis. We would hope that the
consultation exercise would help in this process and would ask consultees to
provide as much information as they have available to assist with any further
analysis.
The characteristics of the insurance markets we present relate to the size of
the market – expressed in terms of the number of policies purchased in a
particular year or the number of households with a particular type of
insurance policy and the average premium charged to consumers or the
average annual household expenditure on a particular type of insurance.
Combining the household coverage and household expenditure on premiums
provides one measure of the size or household penetration of various
insurance products.
This does not imply that the markets that should be considered for a full cost
benefit analysis are simply and exclusively those markets that are large in a
financial sense. The reforms proposed in relation to non-disclosure and
misrepresentation might affect particular types of insurance products
disproportionately. As such, the Law Commission needs to take these factors
into account.
Therefore, we have also attempted to gather data on a second set of
characteristics describing the various insurance markets in respect of the
number of claims annually, the number of claims paid out by insurers, the
average size of settlement and the proportion of claims submitted that are not
paid for reasons of non-disclosure or misrepresentation. We also provide
some information on the number of complaints brought by consumers to the
FOS that relate to non disclosure or misrepresentation.
In Tables 6 and 7 below, we present information from the 2005/2006 ONS
Annual Expenditure and Food Survey, which gathers detailed information on
the weekly expenditure of 6,785 households voluntarily participating in the
survey of households in the United Kingdom.
London Economics
June 2007 16