The 100 year-old rules governing contracts between businesses and insurers is now set to change, introducing a modern legal regime which will benefit both insurers and their business customers. The bill aims to increase transparency and certainty over the rules that govern contracts between them and reduce the number of legal disputes over time.
This will mean that UK insurers are better equipped to compete against their global competitors. Some businesses are also expected to benefit by around £100m over the next ten years as a result of factors such as lower litigation and transaction costs.
Economic secretary to the Treasury, Andrea Leadsom, said: “Britain’s insurance industry is a major success story, employing over 300,000 people across the country, helping millions of British people and businesses every day and exporting across the globe.
“The Insurance Bill that the government will ensure that Britain’s insurers can succeed in the future, while business customers can take advantage of lower costs.”
The reforms contained in the Insurance bill cover three main areas:
1. Disclosure and misrepresentation in business and other non-consumer insurance contracts
The bill amends the duty on business policyholders to disclose risk information to insurers before entering into an insurance contract, introducing a duty of “fair presentation” of the risk. It also provides the insurer with a number of proportionate remedies for breach of the duty of fair presentation.
The bill abolishes “basis of the contract” clauses, which have the effect of converting pre-contractual information supplied to insurers into warranties without further discussion. It also provides that the insurer’s liability should be suspended, rather than discharged, in the event of a breach of warranty, meaning insurance coverage is restored after a breach of warranty has been remedied.
3. Insurers’ remedies for fraudulent claims
Clear, robust remedies must be provided when a policyholder submits a fraudulent claim.
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