Law experts and consumer groups demand better protection

The Law Commission is about to claim that current insurance law is unsuited to mass-market consumer insurance policies because it is based on commercial insurance practices, the Telegraph reports.

It claims consumer bodies want the Government to include proposed changes in the Queen's Speech to enshrine the ABI voluntary code of practice into law.

Peter Tyldesley, an insurance law lecturer at the University of Manchester said: "There is almost universal agreement this is bad law and disadvantaging consumers. Fortunately many insurance companies follow the ‘best practice’ guidelines laid down by the Financial Ombudsman Services and the voluntary code of practice set out by the Association of British Insurers (ABI).

"However, less reputable insurers continue to rely upon the strict letter of the law to wriggle out of paying reasonable claims. And there are cases where an insurer – no doubt sometimes rightly, but equally sometimes wrongly – suspects fraud, but cannot prove it, and uses these technicalities to reject acclaim. Neither use is defensible."

Consumer groups

The Law Commission, Which?, the Trading Standards Institute, Consumer Focus (formerly the National Consumer Council) and charities such as Macmillan Cancer Support argue that these "best practice" guidelines need to be enshrined in law.

Clearer application forms and the ABI voluntary code have cut the number of claims rejected for non-disclosure and misrepresentation, but the code remains voluntary and only deals with life and health insurance policies. Campaigners want it made law.

The ABI said: "We believe it is not necessary to introduce primary legislation to reform consumer insurance law. The present combination of FSA regulation, the FOS and industry practice provides a regime that adequately protects consumers."