Govt introduces new insurance bill

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Laws governing insurance contracts are to be updated by the government to provide more modern rules and to bring Britain in line with other countries.

The reforms cover three main areas of insurance contracts, disclosure, warranties and fraud.

The laws currently in place in parts date back to 1906 and 1930, the changes are designed to improve transparency and certainty in insurance contracts.

The amendments to disclosure and misrepresentation rules apply to business and other non-consumer insurance contracts, amending the duty on policyholders to disclose risk information to insurers before entering into a contract.

The new reforms would introduce a duty of "fair presentation" of risk, and provides insurers with remedies for breach of duty of fair presentation.

Basis of the contract clauses are to be abolished and allows for liability to be suspended rather than discharged in the event of a breach of warranty, meaning after the breach is remedied coverage is restored.

The bill will also provide new remedies for when a policyholder submits a fraudulent claim.

Andrea Leadsom, economic secretary to the Treasury, said: "Britain's insurance industry is a major success story, employing over 300,000 people across the country, helping millions of British people and businesses every day and exporting across the globe. We want the industry to continue to grow and provide better services to customers, which is why we need to bring insurance contract law into the 21st century."

Maurice Tulloch, CEO of Aviva UK & Ireland GI said: "At Aviva, we've been pushing for some time for contracts to be easier to understand and provide greater clarity for customers. Underpinning this is reform of insurance law to make it more relevant for today's businesses.

"The bill is a very welcome development which will deliver significant benefits to both customers and the industry, helping make the UK a great place to do business."

John Hurrell, chief executive of Airmic, the UK's risk management trade body, said: "We welcome this legislation as it addresses serious shortcomings in the legal framework. The UK is unique amongst advanced economies in that our current legal framework potentially penalises the purchaser of commercial insurance and creates uncertainty over whether policies bought in good faith will pay out in the event of a claim."

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