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

Section 6 Case Study - Critical Illness Cover
Table 18: Aggregate Static Economic Impact of Proposed Reforms
Type 1
firms
Type 2
firms
Honest
Consume
rs
Increased claims paid -£2.08m -£7.77m +9.855m
Recurrent
Administration Costs
Retention of
Premiums
-£0.482m to
-£0.241m
-£0.034m to
-£0.017m
DR 43
Consume
rs
+£1.11m +£0.21m -£1.321m
Increased premiums 44 +£1.45m +£7.60m -£9.050m 45
Other
Dispute Resolution +£0.390
m
Benefits of
Regulation
Sub-Total 46 £0.0m to
+£0.241m
Total economic
impact 47
£0.0m to
+£0.017m
+£0.987m
+£0.471 +£0.390
m
+£0.861 million to £1.120 million per annum
The information presented here is a simple static analysis of the expected
impact of these proposals. In reality, the proposals are likely to alter the
behaviour of firms and consumers, in ways that are not modeled here. Given
the large expected rise in premiums for Type 2 firms, it is probable that some
of these firms will exit the market.
As with any analysis of this nature, the absence of hard data make the
provision of an exact estimate of the costs and benefits associated with a
particular policy of proposal exceptionally difficult. As such, care should be
taken with the estimates presented.
43 DR indicates consumers who have recklessly or deliberately misrepresented
44 Incorporating retention of premiums in the case of deliberate or reckless misrepresentation
45 For simplicity we have not sought to distinguish between premiums paid by honest consumers and
those paid by dishonest consumers.
46 Total may not add exactly due to rounding
47 This estimate relates to the aggregate economic impact across all firms, consumers and the wider
economic impact.
London Economics
June 2007 56