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

4.10 Some consultees have asked how our regime would apply to privately-owned
high-value yachts and aircraft. We understand that these are usually owned by
special purpose vehicles, so the insured would not be a “natural person” and
would not fall within our definition of a consumer. However, we would welcome
views as to whether there is a need to exempt particularly high-value items from
the consumer regime if they are owned by individuals.
4.11 We provisionally propose that the consumer regime should apply where an
individual enters into a contract of insurance wholly or mainly for purposes
unrelated to his business.
4.12 We ask whether there is a need to exempt insurance of specific high-value
items (such as jets and yachts) from the consumer regime.
ABOLISHING THE DUTY TO VOLUNTEER INFORMATION
Is a duty to disclose needed?
4.13 It is now generally accepted as good practice that in consumer insurance, an
insurer should ask questions about any material facts it wishes to know. This was
set out clearly in the Statements of Insurance Practice issued by the Association
of British Insurers (ABI). For long-term insurance
Those matters which insurers have commonly found to be material
should be the subject of clear questions in proposal forms. 6
For general consumer insurance, the provision is similar:
Those matters which insurers have found generally to be material will be
the subject of clear questions in proposal forms. 7
We saw earlier that the Financial Ombudsman Service (FOS) refuses to allow an
insurer to avoid a policy for a non-disclosure where no question was asked. In
considering a consumer non-disclosure case, the ombudsman will start by asking
whether the insurer has provided evidence that it asked a question to which it
received an inaccurate response.
4.14 Our view is that we should bring the law into line with industry practice and
ombudsman guidance by requiring insurers to ask clear questions about any
matter that is material to them. We would abolish consumers’ residual duty of
disclosure. The insurer would thus have a remedy only if there had been a
misrepresentation.
4.15 In 1980, the Law Commission argued against abolishing consumers’ duty in this
way. It gave three main reasons:
5 Above at paras 3.35 to 3.38.
6 Association of British Insurers, Long Term Insurance: Statement of Normal Practice, 1(c).
7 Association of British Insurers, Statement of General Insurance Practice.
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