Out of date insurance law must goWhich? calls for review of insurance legislation

30 October 2010

Plane at sunset

Fear of flying is all to do with a loss of control: you're in someone else's hands

Policyholders are getting a raw deal because insurance law is archaic. Which? is calling for a review so you are not penalised for failing to disclose something you didn't think was relevant.

Under current insurance law, policy applicants must tell their travel or private medical insurer anything that may make an impact on a subsequent claim. If the provider concludes that they failed to disclose a pertinent fact, it can dismiss the claim. According to Which?, this is unfair, because the customer is not an expert in travel or medical insurance and may honestly not realise that a condition or illness they suffered in the past is relevant when buying a policy. 

Edwardian insurance law

The current law stems from the Marine Insurance Act (1906). This piece of legislation was introduced to make it easier for experts to negotiate business, and made it mandatory that they disclose all important facts. However, the average insurance customer is no legal or insurance expert. Which? believes that the law as it stands penalises lay-people for not revealing information they didn't feel was relevant or have forgotten about.

Insurance complaints

Problems resulting from non-disclosure have impacted the financial regulators.The Financial Ombudsman Service (FOS) deals with more than 1,000 cases a year where claims are refused because of non-disclosure. HM Treasury believes that many more such disputes are never taken to FOS.

Which? senior advocate Lucy Widenka said: 'We are calling for the law to be updated to ensure that consumers know their rights and are confident in the product their are buying.'

To find out more, visit the Which? financial complaints guide. Do you think current insurance law is fair? Have your say on Which? Conversation

pound coins

Which? Money when you need it

You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.

Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.

Or for money-saving tips, and news of how what's going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast

For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.