Through the channels of your letter page I wish to invite comments from insurers, brokers and solicitors regarding a problem we have with a shop policy that has been voided "ab initio" due to non-disclosure.

We arranged cover for our client in October 1997 through a retailers scheme. The policy was renewed in October 1998 and 1999 with the same syndicate. In February this year the insured suffered a theft at his shop and the resultant claim was repudiated due to non-disclosure. The underwriters advised us that the policy was to be voided "ab initio".

A full refund of the renewal premium paid was given to the insured.

In our opinion if the policy was to be voided "ab initio", (I understand the meaning of this phrase is from inception) then all premiums paid since inception of the policy should be refunded to the insured.

The Insurance Ombudsman took the same view when reporting on a case in 1993. In his opinion, inception of a policy is the point in time when the original duty of disclosure arose. The underwriters have pointed out quite rightly, and conveniently, that the decision of the Ombudsman does not apply to commercial insurances. I have always understood that the basic principles of insurance apply to all insurance contracts, whether private or commercial. I was not aware that different principles applied to personal and commercial insurance policies.

The underwriters state that, when they renewed the policy each year, the client entered into a new contract of insurance and so they are only liable to refund premiums for the current period of insurance.

We say that the original policy was renewed for a further 12 months. At no time has the insured been required to complete a new proposal form so that a new policy contract would be issued.

Your readers' views on this matter would be welcome.
Adrian Moore
T.G. Webster
Insurance Brokers and Bikerline Direct
West Yorkshire

Brokering new approach
It is interesting that readers of Insurance Times took the trouble to respond to my letter (July 13) on dual pricing with particular reference to CGNU.

I am sure the letters published were not the only ones received and I have also had feedback from colleagues in the industry in support – demonstrating the depth of feeling brokers have over this issue.

At the moment, much press coverage is taken up with the repeal of the Insurance Brokers Regulatory Council (IBRC) and the concerns over General Insurance Standards Council (GISC), but I believe a greater threat to our industry, particularly a smaller broker like ourselves, is "dual pricing" or more appropriately "out pricing" of brokers.

The British Insurance Brokers Association (Biba) seems to be sitting on the fence rather than confronting the issues and perhaps risks upsetting the insurers.

Has it forgotten who it represents? Every broker in the land must be in support of this issue and surely under the guidance of the trade associations that represent us must have a substantial influence with the insurers.

So Biba etc, use your weight to support the issues that are going to the see the small local broker survive by being able to compete with the direct insurers. If we don't survive then what future have you got?
N.K. Webb
P.W. White & Partners Limited

Just the job
I read with interest the comments of Andrew Perry (Letters, July 20) regarding the need for a legitimate insurance solution to employment dispute actions. This was highlighted by the £70,000 settlement made by Link Insurance to a former employee on the basis of sex discrimination that unfortunately, given the rising tide of employment related legislation, is by no means an isolated incident.

Deutsche Bank, The Economist, the PGA, South African Airways, Kiss 100 FM, Currys, Marks & Spencer, West Midlands Police, Scotland Yard, Alliance & Leicester and Groupama are among those organisations that have had to deal with claims by employees for either unfair or discriminatory treatment.

This is no surprise to the Department of Trade & Industry; last year it predicted that new provisions of the Employment Relations Act would increase the number of unfair dismissal claims by between 10,000 and 14,000 to around 51,000 a year.

Largely as a result of the reduction in the qualifying period for unfair dismissal claims from two years to one and the increase in the ceiling for compensation from £12,000 to £50,000 in June this year, Acas reported a 25% increase in the number of employment tribunals over the same period a year ago.

The claims cover everything from unfair dismissal to sex and race discrimination. And because there is no cap on the amounts that can be claimed as compensation under these latter two actions, settlements of more than £1m are already being seen.

Given these dramatic changes to employment legislation, the emergence and increasing use of "no win, no fee" agreements and the greater confidence of individuals in standing up for their rights, Perry is entirely justified in highlighting the need for a "legitimate insurance solution".

Legal expense policies have long been the only insurance option in trying to address the problem, but if the insured fails to follow proper procedures in the first instance, the policy is unlikely to provide an indemnity.

While I agree entirely with Perry's assertion that all businesses should exercise their duty of care in handling employment issues, it is nevertheless a fact that we are living in a litigious age, fuelled by expansive legislation with highly publicised settlements and awards made to employees, so that even the cautious and responsible employer will find themselves defending claims from disaffected staff.

I suggest that responsible employment practices and risk management, together with an Employment Practices Liability policy, are the legitimate insurance solution that Perry and companies in general are seeking.
John Taylor
Executive risk development underwriter
Chubb Insurance Company of Europe S.A.

GISC's OK in my book
I read Andrew Paddick's letter addressed to all brokers in the UK entitled "Regulation – General Insurance" (July 27) and felt that I must respond and urge him to reconsider.

I have read and carefully considered the General Insurance Standards Council (GISC) rules, and, while not perfect, I cannot agree that they are deeply flawed, inconsistent nor illogical, as suggested. My reading of both the rules and the explanatory notes that accompanied them leads me to conclude that a considered and pragmatic "first step" had been taken to what should be a harmonious and single regulatory regime for the entire insurance profession.

You state in your letter that more than 4,000 firms voluntarily joined the Insurance Brokers Regulatory Councils when the Insurance Brokers Regulations Act came into force, and go on to compare this with the "hundreds" of firms that applied to GISC in the last few weeks. Surely it is misleading to compare the situation that existed then with that which applies today?

  • At the time the IBRA came into force there were no other regulators, whereas today there are still two (IBRC and the Association of British Insurers' Code of Conduct), both of which will be around until at least April 2001

  • At inception it was expected that the IBRC would be the only regulator for the profession, and that in turn would be the mandate for higher standards. By providing an alternative, the ABI Code of Conduct has diluted and undermined such aspirations.

    Surely you can see the parallels?

    The industry has an opportunity to rally behind a single body, providing regulation of all participants in the sale of general insurance products. By perpetuating an alternative, you simply dilute the potential effectiveness of this unique position.

    Would it not be better to accept that, in the interests of the insurance community as a whole it is better to support a single regulatory framework, and lobby for change from within, rather than to exclude oneself and create a disparate and competing framework?

    Andrew, in the interests of the whole insurance community, please reconsider.
    Grant Ellis ACII, Registered Insurance Broker
    Managing director
    The Broker Network Ltd

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