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

(3) The FOS will order an insurer to settle claims on a proportionate basis
where there has been “inadvertent” misrepresentation and the insurer,
had it been aware of the truth, would simply have accepted the
application at an increased premium. In contrast, both the Statements of
Practice and the FSA Rules allow avoidance for negligent
misrepresentation.
The FOS approach has had a significant influence on our thinking.
3.55 The question is whether the FOS scheme, supported as it is by the FSA Rules, is
sufficient, or whether the underlying law of consumer insurance needs reform.
We are satisfied that the FOS is not an alternative to law reform, for the reasons
we discuss below. 28
The FOS: advantages and disadvantages
A scheme with many advantages to consumers
3.56 From a complainant's perspective, the FOS offers many advantages over the
alternative of court action:
(1) Compulsory jurisdiction complaints are determined by reference to what
is “fair and reasonable in all the circumstances of the case”. This leads to
a much more consumer-friendly approach than the strict letter of the law.
(2) The service is free to complainants.
(3) The FOS can provide remedies not available through the courts. For
example, it may instruct an insurer to reinstate a policy, or to rewrite it on
different terms.
(4) An application to the FOS is a “no lose” option for complainants. If a
complainant accepts the ombudsman's decision it becomes binding on
both insurer and complainant. However, the complainant is free to reject
the decision and pursue the matter through the courts.
(5) The FOS processes are intended to be relatively rapid.
(6) The FOS has an inquisitorial process. Once a case is accepted for
investigation, the FOS will carry out its own investigations rather than
merely relying on the arguments presented by the parties.
(7) The FOS has introduced several initiatives to make its service more
accessible to complainants. It maintains an informative website and a
range of publications. In 2006 it was capable of conducting
“correspondence in Arabic, phone calls in Tagalog and emails in Urdu”. 29
(8) The processes are intended to be informal and friendly. There is no need
for a complainant to be represented.
28 See Para 3.58 below.
29 Financial Ombudsman Service, Annual Review 1 April 2005 to 31 March 2006, p 49.
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