Insurers will be unable to unfairly reject customers' claims because they have given the wrong information about an irrelevant element of their policy after the Insurance Act 2015 was enshrined in law.
However, the new Act, which covers all insurance products, will not come into force in England, Wales, Scotland and Northern Ireland (with a few minor exceptions in NI) until August 2016.
So in the meantime, make sure you disclose all relevant information and check all your policies are correct when taking out insurance products (see our Cheap Insurance section for more ways to compare and save).
The Insurance Act 2015 contains two main clauses that benefit consumers:
- It means insurers can't wriggle out of paying claims by rejecting customers where they've breached an element of their policy that has no relevance to the claim. For example, say a customer has an insurance policy on their garage and the policy contains a warranty that means a burglar alarm has to be installed. If the garage were to burn down and inspectors see there was no burglar alarm installed, at present the breach could invalidate the claim. But this won't happen under the new rules.
- It places more responsibility on insurers to ask the right questions in order to decide whether or not to insure potential customers and at what price, rather than the burden being on customers to volunteer information which may be relevant.
The law follows on from the Consumer Insurance (Disclosure and Representations) Act 2012 which came into force in April 2013 (see the Consumers protected as insurance law reform begins MSE news story).
In 2010 Martin Lewis, founder and editor of MoneySavingExpert.com, signed a letter urging the Government to implement the Law Commission's proposals to loosen the rules on what consumers had to declare.
It was sent to various newspapers and websites after a woman was denied a critical illness pay out for leukaemia following a failure to declare unrelated ear infections. (See the Call for insurance law reform MSE News story for more information and to see a copy of the letter.)
Stephen Lewis, the law commissioner leading the insurance contract law project for England and Wales, says: "We are delighted the Government has implemented the majority of our recommendations in the Insurance Bill.
"Insurance underpins a healthy and prosperous society. It enables businesses and individuals to protect themselves against risk. But insurance contract law was out of date and no longer reflected the realities of today's commercial practices.
"The provisions of the Insurance Act 2015 will modernise the law; balance more fairly the interests of insurers and buyers; and provide a framework for an effective, competitive and trusted business insurance market."