A host of industry experts are calling for radical reform of insurance rules on consumers' disclosure requirements to prevent unfair rejection of claims.
Figures including this site's founder Martin Lewis, a director of consumer body Which? and a senior executive at the British Insurance Brokers' Association have signed a letter urging the Government to implement Law Commission proposals to loosen the rules on what consumers must declare.
In some cases, insurers reject complaints where a consumer has not declared a fact completely irrelevant to the claim. Insurance application forms often only state deep in the small print that criminal convictions and unrelated medical conditions must be declared.
The letter cites the example of a woman denied a critical illness payout for leukaemia followinga failure to declare unrelated ear infections.
The Association of British Insurers insists many of its members already adopt less onerous disclosure requirements.
A spokesman adds: "We share the Law Commission's desire that customers should be treated fairly. The Commission's proposals give legal status to existing best practices, and brings them together in one place in a clear format."
Below is the letter
"Insurance law needs change. Its current inadequacies are well illustrated by the case of a woman denied a critical illness payout for leukaemia following a failure to declare unrelated ear infections. The same harsh rules apply to all other types of consumer insurance, including motor and household. We therefore urge the Government to implement the Law Commissions' proposals for reform.
"The present law was developed to govern face-to-face commercial insurance deals in the coffee-houses of Georgian London. It requires consumers to volunteer any facts an insurer would regard as relevant – an unreasonable obligation in a modern mass-market internet world. If a consumer fails to make full disclosure the insurer may later be entitled to cancel the policy from outset and reject any claim – even if the consumer acted honestly and reasonably and there is no connection between the fact concerned and the loss.
"Commendably, many insurers do not rely on their legal rights. Instead they follow best practice set out in Ombudsmen's guidance. We believe the law should be brought into line with best practice, giving consumers the certainty of legally-enforceable rights, and benefiting insurers by increasing confidence in their products and professionalism."
Laurence Baxter, Head of Policy and Research, Chartered Insurance Institute;
Lola Bello, Senior Policy Advocate, Consumer Focus;
Professor John Birds, University of Manchester;
Beatrice Brooke, Policy Manager, British Heart Foundation;
Peter Hinchliffe, Former Lead Ombudsman for Insurance;
Mike Hobday, Head of Campaigns, Policy and Public Affairs, Macmillan Cancer Support;
Martin Lewis, MoneySavingExpert.com;
Professor Robert Merkin, Deputy President, British Insurance Law Association;
Helen McCallum, Director of Policy, Advocacy and Communications, Which?;
Michelle Mitchell, Charity Director, Age UK;
David Sanders, Lead Officer for Civil Law and former Chairman, Trading Standards Institute;
Christopher Stacey, UNLOCK, the National Association of Reformed Offenders;
Peter J Staddon, Head of Technical Services, British Insurance Brokers' Association;
Peter J Tyldesley, Senior Lecturer, University of Bedfordshire;
Laura Weir, Head of Policy and Campaigns, MS Society
Further reading / Key links