Consumers duty to disclose all relevant information to insurance companies when buying an insurance policy has changed, following the first major shakeup of insurance disclosure in over a century.

The Consumer Insurance (Disclosure and Representations) Act received Royal Assent on 8 March 2012.  It shifts the emphasis away from a consumer’s duty to disclose all necessary information, to a requirement for insurers to ask particular questions and obtain specific information about their customers, before they issue an insurance policy.  The Act allows a minimum of a one year gap between the date the act was passed and the date it comes into force.

The Bill only applies to consumer insurance contracts i.e. contracts entered into by individuals for purposes unrelated to the individuals’ trade, business or profession. However it will affect anyone involved in consumer insurance, whether as a broker, lawyer or agent.

“The new act sweeps away the concept of ‘utmost good faith’ in consumer insurance contracts and puts the responsibility on the insurer to ask the right questions,” said James Burgoyne, Director, Brunel Professional Risks.  “Insurers will no longer be able to rely on non-disclosure if they wish to refute cover and they may pursue professional advisers and other introducers for failing to provide accurate information instead.  This could affect a wide number of businesses which introduce consumer insurance business, including estate agents, brokers, financial advisers, solicitors and accountants.  Fortunately everybody has at least twelve months to understand how this may affect their business and put in place effective risk management procedures.”

Summaries of the act have been published by Clyde & Co here and here and Freshfields, here.  HM Treasury’s press release when it introduced the Bill in May 2011 appears here.