January review may pave the way for reforms to aid blitz on fraud

The Law Commission is this month set to scrutinise the insurance industry and publish proposed reforms to insurance contract law.

Fraud experts said the Law Commis-sion's review will give the industry an important opportunity to argue for reforms to the law relating to the effect of fraud on insurance contracts.

Topics to be discussed include non-disclosure and breach of warranty, in particular whether insurers should refuse claims even if a policyholder's mistake was unintentional.

John Lockey, chairman of the British Insurance Law Association (Bila) , which comprises insurers, brokers and lawyers, said: "The reforms are trying to make the remedies [for claims] more proportionate and give judges some discretion in determining decisions."

Davies Arnold Cooper partner, Nick Young, said the review needed to be seen as part of a "two-pronged attack" on fraudsters by the insurance industry, coupled with the government's review of fraud.

The commission and Bila will meet to determine the scope of the review on 19 January.

The Law Commission will also publish a scoping study this month that will be subject to a 12-week comment period, after which a consultation paper will be published.

The Law Commission announced in June that it would re-examine the fairness of the law based on the findings of reports by its own staff, the National Consumer Council and Bila, which have all called for reform.

Davies Arnold Cooper: industry must modernize
Law firm Davies Arnold Cooper (DAC) has warned the insurance industry that it must use the opportunity of the Law Commission review to modernise.

DAC said the London market risked losing its status as the leading international insurance market if it did not use the review to achieve "big, progressive changes".

Kenneth McKenzie, head of insurance at DAC, said: "Structural reform, rather than copious regulation, must address the issues of: transparency; remuneration; agency relationships; contract certainty; speeding up the claims process; a consistent approach to dealing with insurance fraud; and subrogation.

"Change is needed to create a climate for an efficient marketplace. If London doesn't recognise and control change, it may lose the opportunity to direct that change."