Law Commission non-disclosure row with ABI reignited

Tension between the Association of British Insurers (ABI) and the Law Commission over non-disclosure rules is mounting following a television programme focusing on declined claims.

Despite improved pay-out rates across most insurers, ITV1's ‘You Think You're Insured?', aired last night, followed cases where insurers refused to meet claims due to a variety of non-disclosure issues.

Speaking on the show, Law Commissioner David Hertzell said a Code of Practice laid out by the ABI in January to address non-disclosure concerns does not go far enough to protect consumers.

He also repeated his assertion radical legal reform is needed to tackle what he calls "out-of-date" legislation.

A report by the Commission on non-disclosure is due out on 15 December, following a consultation with 105 insurers, trade bodies - including the ABI - intermediaries and consumers.

On the findings, Hertzell told IFAonline: "Overwhelmingly the response was in favour of change because people feel current legislation is out of date.

"If you look at what the ABI, FSA and Financial Ombudsman say on non-disclosure you will find it all very different. The law is different again.

"Both consumers and insurers are confused as to where they stand. What we are aiming for with our proposals is consolidation and clarification."

In January, the ABI introduced three categories of non-disclosure in a bid to improve customer understanding of protection and lower decline rates due to non-disclosure.

They are: ‘innocent', resulting in the claim being paid in full, ‘negligent', applying a proportionate remedy, and ‘deliberate' (or ‘without any care'), resulting in a declined claim.

While the trade body broadly supports the Law Commission's proposals, Nick Kirwan, ABI assistant director for health and protection, who also appeared on last night's programme, maintains its code is "working well".

"Our code actually goes further than the Commission's proposals to ensure consumers are treated fairly, especially on unrelated non-disclosure," he says today.

"The law has never distinguished between this and other types of non-disclosure but the code does. Where people forget very minor health disclosures the ABI code does not treat this as deliberate non-disclosure."

Law Commission proposals would tighten the rules to say any non-disclosure leaves the consumer legally culpable.

Kirwan adds: "In its proposals, the Law Commission has copied a lot of our code. For life and critical illness we offer as much cover as the Commission's proposals."

However some legal professionals argue the ABI code is no substitute for law reform as it is not legally enforceable and consumers have little knowledge of what it includes.

The Law Commission forecasts no action will be taken on any draft bill to come out of the consultation before the end of next year, following the General Election.