Legal reforms announced by the British Treasury will make it harder for insurance companies to avoid paying out on legitimate claims. The bill will introduce ‘fair representation’ for commercial policyholders and provide remedies for insurers to combat fraud.
The government’s introduction of the Insurance Bill to Parliament is aimed at updating the current 100 year old rules between businesses and insurers. The main areas of reforms come under: Disclosure and misrepresentation in business and other non-consumer insurance contracts; warranties and insurers’ remedies for fraudulent claims.
The rule changes are a positive step for the insurance industry and the general public, introducing transparency and giving policyholders more certainty. The rules will reduce the number of disputes between insurers and individuals as well as protecting insurers against fraudulent claims.
According to the Treasury, the rule changes will be more aligned with the modern legal regime. It also means British insurers will be better equipped to compete in the global insurance industry and better serve customers in the UK.
Economic Secretary to the Treasury, Andrea Leadsom said the changes will help millions of businesses and individuals across the country and allow the industry to provide insurance at lower costs. The changes have also been welcomed by the insurance industry as it addresses significant shortcomings in the legal framework which restricts how insurance companies can compete.
The bill has received a positive reception from business leaders as it will mean contracts will be easier to understand and individuals will have more clarity over what their policy covers. John Hurrell, Chief Executive of Airmic, the UK’s risk management trade body, said: “The new legislation provides much needed clarity which will be good for business and will help to maintain confidence in the London insurance market.”
The shake up of business insurance laws follows a similar change to consumer insurance claims law. The Treasury is committed to make the changes “uncontentious” to ensure a swift passage through parliament however the Treasury said: “We can’t comment on the detail of legislation that has not yet been introduced.”
Businesses are expected to benefit by £100m over the next ten years due to lower litigation costs and transaction fees. The Bill is the product of 8 years of consultation by the Law Commission and the Scottish Law Commission between businesses and insurance companies.
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