MSE News: Consumers protected as insurance law reform begins

"New rules which force insurers to ask customers specific questions about their circumstances, have been introduced..."
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Consumers protected as insurance law reform begins

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  • PincherPincher
    6.6K Posts
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    How about making them swallow the Certificate of Structural Adequacy after underpinning. If the work is so adequate, why am I still paying £1,500 a year for building insurance?
  • weejonnieweejonnie Forumite
    330 Posts
    "It means insurers cannot decline claims from customers who unknowingly give incorrect or incomplete information on the grounds of non-disclosure, unless they have deliberately misled the firm."

    This needs clarification

    There are two types of misrepresentation under the act "deliberate or reckless" or 'careless'. "Deliberate or Reckless is making a misrepresentation either knowing it to be untrue or not caring whether it was true or not - and the subject was relevant to the insurer i.e. they asked a question. 'Careless' is a misrepresentation that is not 'deliberate or reckless'.

    If the misrepresentation is 'careless' then the insurance company can still avoid the policy and refuse to pay out all claims, but must return the premium (if they would not have accepted the risk had they known the true facts) or impose the terms that they would have imposed and, if the misrepresentation would have resulted in an additional premium, reduce the claim proportionately (if they would have accepted the risk).

    If the misrepresentation is deliberate or reckless then the insurer can avoid the policy, refuse all claims and keep the premium.

    In fact the duty of the proposer is to "take reasonable care" not to make a misrepresentation. So 'not knowing' is inadequate if a reasonable proposer would have taken the trouble to find out and failure to "take reasonable care" could result in the misrepresentation being "reckless"

    The law provides additional protection for the consumer (who must be an individual and protecting mainly personal insurance) in that the insurer cannot void the policy if the consumer isn't asked a question and doesn't volunteer information. This does not apply for business insurance where the duty to disclose material facts remains.

    The example below is not definitive as it can be quite difficult to come up with a 'careless' misrepresentation.

    Suppose the question was "Is your home in an area that has suffered subsidence?" Obviously being in a subsidence area is 'relevant' for the insurer. If you answer "No" and next door is tilting at a crazy angle or your home has large cracks in it due to subsidence then the misrepresentation is "Deliberate". If you have applied for insurance and not checked the area at all then the misrepresentation could be "reckless". If you took the trouble to actually have a look around but did not spot the obvious signs of subsidence on a neighbouring property then I suspect that the misrepresentation would be "careless". Note that in any case, if the insurance company found out that there was subsidence in the area and would not have insured the property then they could turn down the claim and if they would have accepted the policy with a £5,000 subsidence excess then they could impose the excess and if, in addition they would have doubled the premium then they are within their rights to only pay half the claim.

    (I am pretty sure there will soon be a lot of civil action to build up a database as to what is "deliberate or reckless" and what is "careless" misrepresentation.)

    The new law will have an impact on 'statements of fact' or 'assumptions' that are often found on websites. I think "assumptions" will have to go but customers who have to click a button stating "I agree with the above" or something similar - well they should read the SOF carefully before doing so.
  • weejonnieweejonnie Forumite
    330 Posts
    With the regards to the person who was refused a critical illness insurance claim for leukaemia due to an unrelated non-disclosed condition.

    If the insurance company had not asked a specific question about the condition then they have to pay the claim.

    If they HAD asked a specific question about the other condition then, if they decide the person had 'deliberately or recklessly' given the wrong answer they could still avoid the policy and not pay out.

    If the question had been phrased more generally then it is more probable that the answer given was 'careless' - in which case the insurer can impose terms retrospectively and, if they would have loaded for the additional condition, reduced the claim proportionately. It is quite possible that a badly phrased or generalised question will result in the insured being regarded as having taken 'reasonable care' and so receive a full payout.

    Insurance companies will be asking ever more precise and relevant questions now before providing quotes for insurance - it is up to the consumer customer to make sure that they read them and "take reasonable care" to answer them correctly.

    Note that a "deliberate or reckless" misrepresentation gives the insurer the right under the law to avoid the policy and refuse to pay the claim EVEN IF the misrepresentation was unrelated to the claim and even if the insurer would have accepted the risk at normal terms had they known about the condition.

    The full law is available http://www.legislation.gov.uk/ukpga/2012/6/pdfs/ukpga_20120006_en.pdf here.
  • Yorkie1Yorkie1 Forumite
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    weejonnie wrote: »
    Suppose the question was "Is your home in an area that has suffered subsidence?"
    weejonnie wrote: »
    With the regards to the person who was refused a critical illness insurance claim for leukaemia due to an unrelated non-disclosed condition.

    If the insurance company had not asked a specific question about the condition then they have to pay the claim.

    If they HAD asked a specific question about the other condition then, if they decide the person had 'deliberately or recklessly' given the wrong answer they could still avoid the policy and not pay out.

    If the question had been phrased more generally then it is more probable that the answer given was 'careless' - in which case the insurer can impose terms retrospectively and, if they would have loaded for the additional condition, reduced the claim proportionately. It is quite possible that a badly phrased or generalised question will result in the insured being regarded as having taken 'reasonable care' and so receive a full payout.

    Insurance companies will be asking ever more precise and relevant questions now before providing quotes for insurance - it is up to the consumer customer to make sure that they read them and "take reasonable care" to answer them correctly.

    I agree with the above posts. The more vague or imprecise the question, the harder it will be to demonstrate that the policyholder has deliberately or carelessly misled the insurer.

    So, using the question in the first quote, how do you define "area"? 50 yards? 500 yards? Postcode?

    I did notice earlier this year when investigating home insurance renewals that some insurers were already being precise about some of these details. Mind you, I'm not sure I could measure 500 yards precisely anyway ...
  • edited 10 April 2013 at 7:55PM
    Beverley_BillBeverley_Bill Forumite
    50 Posts
    Part of the Furniture 10 Posts Combo Breaker
    edited 10 April 2013 at 7:55PM
    I worry about the questions that will be asked. For example, the lady with Leukaemia who was refused a claim because of an ear infection may now be asked, "Have you visited a doctor in the last 25 years?" Will there be an option to say Yes, it was an ear infection or an ingrowing toenail whilst at school.

    A similar case could be with motor insurance, someone in the village was knocked off his motorcycle and suffered serious injuries, the claim was refused because the motorcycle had an aftermarket exhaust silencer fitted. The type of silencer would not have prevented the car driver going through a give way sign and colliding with the bike.

    I only see another chance for insurance companies to raise premiums for everyone.
    My names not Bill but I am from Beverley
  • When applying for this top up insurance you are faced with the following set of questions -

    "
    Medical History Declaration

    You must declare any physical or mental condition which any Person requesting insurance is known to suffer from at the time of applying for this insurance or for which he/she had received medical treatment or advice during the 5 years immediately preceding the date of application. Medical advice or treatment is deemed to be:
    1. A consultation with your GP or any other doctor (either at home or at the surgery), other than for minor ailments such as the common cold.
    2. Treatment at any hospital (either outpatient or inpatient).
    3. Any medical tests, examinations or referral to a specialist for the same.
    4. Any prescription for medications, or repeat prescriptions for the same.
    If you or others to be insured can answer NO to ALL the questions above, you can go ahead and apply for cover.
    If you answer YES to one or more questions you will need to complete a medical screening for each affected traveller. "



    This seems to get around the question of insurers having to ask specific questions about illnesses (new regulations) and is a "catch-all" set of questions that are designed to ensure that there may be something you have actually forgotten over 5 years and therefor make any insurance worthless?


    The new law means insurers have to ask the questions they want answers to instead of consumers having to volunteer what information they think may be relevant.


    It is no wonder so many travel insurance claims are refused.
  • vaiovaio Forumite
    12.3K Posts
    Part of the Furniture 10,000 Posts Combo Breaker
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    ........A similar case could be with motor insurance, someone in the village was knocked off his motorcycle and suffered serious injuries, the claim was refused because the motorcycle had an aftermarket exhaust silencer fitted. The type of silencer would not have prevented the car driver going through a give way sign and colliding with the bike......

    undeclared modification will allow the riders own insurer to reject claims for damage to the bike but wouldn't affect the right of the rider to claim against the at fault car driver for his injuries & damage to bike etc etc
  • FlameCloudFlameCloud Forumite
    2K Posts
    Part of the Furniture 1,000 Posts Name Dropper
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    vaio wrote: »
    undeclared modification will allow the riders own insurer to reject claims for damage to the bike but wouldn't affect the right of the rider to claim against the at fault car driver for his injuries & damage to bike etc etc

    Quite right, specifically s148 & s151 of the RTA.

    The insurer would however of course have recourse against their own policyholder for the costs.
  • vaiovaio Forumite
    12.3K Posts
    Part of the Furniture 10,000 Posts Combo Breaker
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    Nah, the bike rider with the undeclared modifications wasn't at fault in the accident. All costs would be recovered from the at fault car driver
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