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Insurance Policy Holders Protection

Volume 979: debated on Tuesday 19 February 1980

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4.26 pm

I beg to move

That leave be given to bring in a Bill to remove the effect of certain exclusion clauses on insurance policies; to remove the right of insurers to avoid liability under policies for non-disclosure of certain information not sought by them; and otherwise to amend the law so as to provide further protection for insurance policy holders.

The hon. and learned Member for Leicester, West (Mr. Janner) is not bound to take his 10 minutes, but he is entitled to do so.

I shall take much less than 10 minutes.

I seek leave to introduce the Insurance Policy Holders Protection Bill which, however brief, may nevertheless be important to literally millions of people. These include Members of Parliament who may one day have cause to bring a claim on an insurance policy, only to find that they do not have the protection which they thought that they had acquired.

Insurance policies, which are excluded from the effects of the Unfair Contract Terms Act, are all too often misleading in their titles, insidious in their content and wicked in the power given to insurers to avoid liability where the insured does not answer questions which he is not asked.

As to the titles, I have only to refer to "all-risks" policies which so many of us have and which certainly do not cover all risks; and to the "comprehensive" policy which comprehends what it says it does—and sometimes rather less.

As to the contents, the warranties contained in the policies are in language which most people do not read—and even if they read a clause they do not or cannot understand it.

The disclosure rule is archaic and wrong. People should not be forced to reveal information which is not sought, and which may not even be relevant to their claim and to lose their rights if they do not reveal it.

Those wrongs have been so obvious that the Law Commission, in its working paper No. 73 on insurance law, last year, denounced nearly all of them. The Law Commission, which can scarcely be accused of being staffed by the extreme Left wing, regarded these insurance policies in the words of judges quoted by it as "all too often shocking", "mean", and "contemptible" and said that the public should be warned against the policies. In this House, it is not only possible to warn the public but also to change the rules.

A change may be brought in by removing the exclusion of insurance policies from the Unfair Contract Terms Act. That exclusion should not have been there in the first place. It can have been put in only as a result of powerful pressure by British insurers. That protection of insurers should now be removed and given back to policyholders. They must be entitled to say that the warranty is null and void if it is "unreasonable"; that is all. If it does not "satisfy the test of reasonableness", it should go.

As to the disclosure rule, the suggestions made by the Law Commission are reasonable and simple. The Law Commission suggests that the insured should continue to be subject to a duty of disclosure but that this should be modified and should differ according to whether or not a proposal form has been completed. Where there is no proposal form he should be under a duty to disclose those facts which a reasonable man in these circumstances would be bound to disclose; but where he has completed a proposal form the insurer should be taken to have waived the insured's duty in regard to any fact outside the scope of the questions asked. In other words, if they ask a question, they are entitled to a fair, honest and complete answer. If they do not ask it, they should have done.

At the moment, a travel policy, a road traffic policy, a home owner's policy or a life assurance policy—each is very likely to mislead and not to provide the peace of mind which the insured believes he has bought and whereby has paid for. These policies have deserved the denunciations of the Consumers Association and, last week, of Gordon Borrie, the Director General of Fair Trading. Reputable insurers say they do not often rely on these policies, so they should not object to the Bill.

The general secretary of the British Insurance Association said last week that ultimately the consumer gets what he pays for. In this area, he often not only does not get what he pays for but he may not even get what he believes he has paid for.

In these circumstances, I have pleasure in seeking leave to introduce this Bill, on an all-party basis, within less than half the time allocated to me.

Question put and agreed to.

Bill ordered to be brought in by Mr. Greville Janner, Mr. Arthur Davidson, Mr. W. R. Rees-Davies, Mr. Stephen Dorrell, Mr. Hugh Dykes, Mr. Eric S. Heifer, Mr. Geraint Howells, Mr. Edward Lyons, Mr. Austin Mitchell, Mr. John Sever and Mr. Frank R. White.