Law Commission urges tightening of non-disclosure rules

Law Commission proposals on non-disclosure intend to clarify rules over when an adviser is representing a customer and when they are acting for the insurer, writes Owain Thomas and Laura Miller.

The draft bill also removes the consumers’ duty to volunteer relevant information when taking out a policy by transferring the onus to insurers to ask the questions it needs to get the specific information they want.

An adviser giving impartial advice who conducts a fair analysis of the market and charges the consumer a clear fee is acting for the consumer, according to the bill.

However when an adviser places insurance with only a small proportion of possible insurers then the adviser is deemed to be acting for the insurer.

Similarly if the insurer allows the agent to use the insurer’s name in providing services, markets cover under the name of the adviser, or the insurer asks the adviser to solicit consumers, then under the proposals the adviser acts for the insurer.

Law Commissioner David Hertzell said: “The aim is to clarify the situation, but to achieve absolute clarity you would have to accept a high degree of unfairness. We accept we cannot make any black or white pronouncements, as the situation regarding who the adviser is acting for varies.”

Although the commission was not reacting directly to concerns about critical illness, it dedicated an entire sub-section to this matter, claiming it typified the problems that were being targeted.

If successful the bill would affect all types of cover from life to general insurance and mark the biggest legal change for the industry since the Marine Insurance Act in 1906.

Andy Milburn, head of marketing at Munich Re, says along with the RDR, the draft bill is just another uncertainty for providers and advisers.

“The Tories could scrap the RDR and the FSA at the next election,” he says. “They may not pass this bill and we won’t know for two years.