In a move that may potentially change the way disputes are settled, the UK government has confirmed that new rules will be introduced putting the responsibility of collecting relevant information of customers on insurance companies before issuing policies. The Consumer Insurance Bill will amend the 105 year old regulations and will bring non-disclosure and misrepresentation rules in line with FOS guidelines.
The Consumer Finance Bill, expected to come in effect in 2013 will make it mandatory for insurers to “ask particular questions and obtain specific information about their customers, before they issue an insurance policy”.
The new rules will usher in a major shift as they will put emphasis on whether insurance companies asked the relevant questions, in the event of disputes over rejection of claims, rather than misrepresentation or non-disclosure.
If it is found that consumers gave wrong answers inadvertently, the insurer would be required to apply ‘’proportionate remedy” – a payout due had the information been collected correctly.
The changes have been proposed after recommendations from the Law Commission and the Scottish Law Commission were received in 2009, in an attempt to bring the 105 years old laws in line with Financial Ombudsman Service (FOS) Guidelines.
“The Government is committed to strengthening consumer protection in financial services and these reforms will help meet this commitment”, said Mark Hoban, Financial Secretary to the Treasury.
“They will provide a better deal for the consumer, while saving money for the industry and giving people the certainty they need when taking out insurance”, he added.
Emphasizing that the changes were made after wide ranging consultations with all the stake-holders, he said: “We have worked hard to consult all of the interested parties in producing this Bill and, as a result, it has received broad-based support, not only from consumers and legal groups, but from insurers and brokers as well”.