Consumer groups urge insurers to back law reform

Insurers are being urged not to block plans to reform “outdated and inequitable” laws that are still causing claims from honest policyholders to be turned down.

The call comes from consumer rights campaigners as the Treasury consults on whether there is enough support to push through the biggest changes to Britain’s insurance laws in 100 years.

Under special parliamentary procedures, the government is aiming to speed the progress of a draft bill that will prevent insurers from rejecting a claim if a policyholder has made an honest mistake on a claim form.

Under the reforms, a policyholder’s “duty of disclosure” will also be abolished. This controversial law allows insurers to reject a claim if a policyholder has neglected to disclose certain information. But, in one case, it was used by a critical illness insurer to deny a cash payout to a woman diagnosed with leukaemia because it had not been
disclosed that she had suffered from an unrelated ear infection.

Many insurers have already adopted these reforms as best practice, but the Association of British Insurers (ABI) has not expressed support for the bill to become to be legally enshrined.

“The reputation of all insurers will undoubtedly suffer a body blow if the ABI once again blocks the introduction of fair law for consumers,” said Peter Tyldesley, senior lecturer in insurance law at the University of Bedfordshire.

“Consumers deserve
modern legally-enforceable rights, not half-baked
voluntary codes or a mere chance that best practice will be followed.”

Tyldesley and a dozen high-profile organisations – including Which? and Consumer Focus, as well as the British Insurance Brokers’ Association, medical charities, and the Chartered Insurance Institute (CII) – are supporting the fast tracking of the bill.

“These reforms will make sure that policyholders are no longer punished for making honest mistakes,” said Laurence Baxter of the CII, the industry body for financial services sector workers.

“The reforms will also benefit insurers by increasing confidence in their products and professionalism,” said Baxter.

The ABI said it shared the desire “that customers should be treated fairly” but that it was “neither supporting or opposing” the bill.