Changes to insurance disclosure (from April 2013)

Introduction

This document outlines the changes to insurance disclosure law that took effect from April 2013. It sits alongside two advice guides (simple and detailed) that Unlock produces on insurance and convictions.

Background

For many years, people with convictions have found themselves in a difficult situation when purchasing insurance. This is because of archaic insurance law dating back to the Marine Insurance Act 1906, which imposed heavy duties on all consumers to disclose all material facts, even if the insurer didn’t ask about them specifically. If you failed to guess what the insurer wanted to know, your claim could be rejected.

A good example of the historical problems with the law is shown in the case of Lambert v Co-operative Insurance from 1975, where a claim was made by a lady who had some jewellery stolen. When she made a claim, the insurance company refused to pay out on the basis that she hadn’t disclosed her husband’s criminal conviction, even though they didn’t ask.

In 2008, the Law Commission consulted on whether the law should be changed. Unlock made a submission which highlighted the problems that the law caused for people with convictions. Following this consultation, the Law Commission recommended a change in the law. Unlock, along with a number of other consumer organisations (including Age UK, Consumer Focus and Which?), worked hard to push the Government to change the law. This was successful in March 2012, when the Consumer Insurance (Disclosure and Representations) Act 2012 received Royal Assent.

What’s changed?

The Consumer Insurance (Disclosure and Representation) Act 2012 came into force on 6th April 2013. It removes the duty on consumers to volunteer ‘material facts’ if not asked. The onus is now on the insurer to ask the right questions. In the Lambert example above, so long as all the questions had been answered fully and accurately, the insurer would have had to pay the claim because they didn’t ask about the husbands’ criminal conviction.

For people with convictions, this will help to clarify the law when companies do not ask about certain convictions (e.g. non-motoring convictions). Previously, you had to disclose all unspent criminal convictions, regardless of whether you were asked about them. This is no longer the case.

The onus now sits squarely with the insurer to ask you the questions that they want to know information about. Instead of a duty to volunteer material facts, now the law requires you to answer the questions that are put to you fully and accurately. You need to “take reasonable care”, and one of the factors that will be taken into account is whether the questions asked by the insurer were clear and specific.

So, forms may get a little longer because the onus is on the insurer to ask you the right questions. Insurers should no longer be making reference to a “duty of disclosure”.

What’s not changing?

It doesn’t stop insurers asking about criminal convictions if they think it is relevant to the insurer. Under the current law, insurers are legally entitled to ask about unspent criminal convictions, and use this as a reason to either charge a higher price, or decide not to offer cover at all. Unfortunately, it’s up to them to decide whether to ask, and if they do ask, what they do when somebody discloses.

You still don’t have to disclose convictions that are regarded as ‘spent’ under the Rehabilitation of Offenders Act 1974. This is even if the insurers ask “have you ever been convicted”. See our simple and detailed guides for more information about this.

What types of insurance do these changes apply to?

These changes apply to ‘consumer’ insurance. This is defined in the legislation as being “wholly or mainly for purposes unrelated to the individual’s trade, business or profession”.

In most cases, it will obvious where it is ‘consumer’ insurance. For example, it will normally include home buildings and contents cover, motor insurance, travel policies and life insurance. It is unlikely to cover insurance policies that have a significant commercial element to them. It doesn’t cover commercial buildings and contents, public liability, commercial motor or insurance taken out by companies. This is covered in more depth in our detailed guide.

These changes apply to comparison websites too, and they also applies to renewals, so insurers will be required to make it clear what information they require, usually by providing you with a copy of what you have provided previously.

Will this make it easier to get insurance with convictions?

At this stage, it’s difficult to say. Most home insurers already ask about criminal convictions. Some only ask about convictions in the last 5 years. For these insurers, so long as your conviction wasn’t in the last 5 years, even if it is still unspent, you do not need to disclose it.

The biggest difference may be for motor insurance, if you have non-motoring convictions. Insurers vary in their questions, but many do not ask about non-motoring convictions (see a list we have produced for some of these), because they don’t see them as relevant to motor insurance. Previously, we advised people to make sure they disclosed all unspent convictions, because legally they were regarded as material facts. Now, if they don’t ask, you don’t have to tell.

In the past, many motor insurers have advised us that they don’t want to know about non-motoring convictions. Until now, it’s been difficult to know whether this was genuinely the case, or whether they were relying on their strong legal position of requiring people to disclose all material facts. We’ll have to wait and see whether these insurers continue to not ask about non-motoring convictions.

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