Airmic wants insurance law reform

It is time the insurance industry reforms a hundred year old law that allows insurers to refute claims based on potentially innocent non-disclosure, claimed John Hurrell, chief executive of Airmic, the UK’s risk and insurance association.

A majority of Airmic members report that they have had a claim rejected in the last 12 months on the grounds of non-disclosure. Only half of them said the claim was eventually settled satisfactorily.

Airmic is spearheading an initiative to change the Marine Insurance Act of 1906, which requires consumers to volunteer information about anything that a “prudent insurer” would consider relevant. A failure to do so allows the insurer to treat the insurance contract as if it has never existed and refuse all claims under the policy.

Airmic members argue that it is just not possible for a complex organisation to declare everything which an insurer might deem to be material at a later stage. It can take up to six months of every year to prepare the disclosure information that insurers legally require.

The way the law is framed is “unacceptable,” said Hurrell. “We've had preliminary discussions with a number of insurers and I think most of them accept that the dice are loaded too heavily in their favour.” They say, however, that market practice dictates that they treat customers fairly.

“What we're trying to do is get an agreement from our partner market on prenuptial clauses that will define materiality as far as can be, define the circumstances when the insurer can avoid the policy and define certain other elements of both parties rights in terms of disclosure so there will be clarity at inception.

“If the law reform cavalry is not about to charge over the hill then we need to take the issue quite seriously ourselves,” said Hurrell.