The Treasury has today published an Insurance Bill to reform and update insurance law and boost growth in the industry.
The Bill follows Law Commission recommendations, published on July 15, which suggested changes in four areas of insurance law. The Bill will modernise 100-year-old rules governing contracts between businesses and insurers by increasing transparency and certainty, in turn reducing the number of legal disputes over time.
However, the Treasury excluded one of the commission's recommendations, which would have given claimants to ability to pursue damages for 'unreasonably' late payments.
The Law Commission was not available for comment, but acknowledged in a statement that this 'recommendation would not be included in the Insurance Bill'.
The recommendations included in the Bill: place the duty on business policyholders to disclose risk information to insurers before entering into an insurance contract; abolish the 'basis of the contract' clause, which has the effect of converting pre-contractual information given to insurers into warranties without further discussion; and provides the insurer with clear, robust remedies when a policyholder submits a fraudulent claim.
Publishing the Bill Economic Secretary to the Treasury Andrea Leadsom said: 'Britain's insurance industry is a major success story, employing over 300,000 people across the country, helping millions of British people and businesses every day and exporting across the globe.
'We want the industry to continue to grow and provide better services to customers, which is why we need to bring insurance contract law into the 21st century.
'The Insurance Bill that the government is introducing today will ensure that Britain's insurers can succeed in the future, while business customers can take advantage of lower costs.'
Commenting on the Bill, Alexis Roberts, a partner in the insurance team at law firm Pinsent Masons, said: 'The changes proposed in the Bill are aimed at bringing business insurance in line with similar changes effected in relation to consumer business.
'Insurance contract law has needed updating for many years and this programme of development is definitely welcome. There are challenges for insurers as a result however. They will need to make sure their policy wordings are updated to make sure they are more explicit about the types of risk that might be excluded in the event of a claim.
'They will also need to make sure they ask potential policyholders the right questions at proposal stage in order to have sufficient information to assess the risk properly. Not asking the right questions could make it harder going forward to decline claims which they may not have intended to cover.'