The British Insurance Brokers’ Association (Biba) and the Association of Insurance and Risk Managers in Industry and Commerce (Airmic) have given evidence before a House of Lords special public bill committee considering the Insurance Bill.
The special committee held its final meeting on 15 December 2014 and the Bill is on track to become law before the General Election in 2015, although it will not come into force until some time later.
Graham Trudgill, executive director of Biba and Graham Terrell of JLT (and deputy chairman of Biba’s liability and accident committee) told the committee that Biba strongly supports the Bill. Trudgill said that the organisation was in favour of the abolition of ‘basis of contract’ clauses, which convert representations by an Insured in a proposal form into warranties, thereby potentially enabling Insurers to avoid liability where there is an inaccuracy in the proposal form.
Biba said it also approves of the proposed new regime of more proportionate remedies for failure to make a fair representation of risk, replacing the current sole remedy of avoidance (even for innocent non-disclosures), which the organisation described as “draconian”.
Airmic CEO John Hurrell and technical director Paul Hopkin also gave evidence to the committee. In a statement on its website Airmic said: “Airmic fully supports the Bill, designed to overhaul the outdated system that has been in place for over a century.”
As well as supporting the current draft Bill, both Biba and Airmic made the case for reinstating proposed protections against the inappropriate reliance on warranty breaches by insurers to avoid policies, which were removed from the Bill to enable it to proceed through the expedited process for non-contentious Law Commission Bills. Biba said that brokers believe that insurers should pay a claim when the breach of a specific risk mitigation term is totally irrelevant to a loss.
Michael Mendelowitz, Chairman of the British Insurance Lawyers’ Association (BILA) and Lord Mance also gave evidence to the committee.
Comment
The proposed changes will undoubtedly provide greater contractual certainty for commercial policyholders. They will also address the current perceived inequality under English law, which tends to favour insurers, by contrast to New York law, for example, which is generally considered to be more balanced. As a consequence, the new Bill will hopefully ensure that the London insurance market remains competitive on a global basis.