Consumer Insurance (Disclosure and Representations) Act 2012: Changes to Insurance Contract Law and Disclosure Requirements

The Consumer Insurance (Disclosure and Representations) Act 2012 brought significant changes to insurance contract law and disclosure requirements. This act aimed to address issues related to misrepresentation and non-disclosure in insurance policies.

Prior to the act, insurers often relied on complex and ambiguous clauses to deny claims based on minor or technical breaches of policy conditions. The act introduced a more balanced approach, focusing on the insurer's reasonable expectation of the risk being insured.

The act also introduced a new test for determining whether a representation made by an insured person is a warranty or a term. This test, known as the "reasonable person" test, considers what a reasonable person would understand the representation to mean.

The Consumer Insurance (Disclosure and Representations) Act 2012 has undergone some significant changes over time.

There are currently no known outstanding effects for this Act, which suggests that it has been fully implemented and is no longer subject to revisions.

Revised legislation carried on this site may not be fully up to date, which is why it's essential to check for any known changes or effects made by subsequent legislation.

At the current time, any known changes or effects made by subsequent legislation have been applied to the text of the legislation by the editorial team.

Section 2(5) of the Act was omitted on August 12, 2016, due to the Insurance Act 2015.

Section 3 of the Act came into force on April 6, 2013, as a result of Statutory Instrument 2013/450.

The Consumer Insurance (Disclosure and Representations) Act 2012 is a crucial piece of legislation that affects consumer insurance contracts in the U.K. Section 10 of the Act states that a term of a consumer insurance contract that would put the consumer in a worse position than they would be under the provisions of this Act is of no effect.

If a consumer makes a careless misrepresentation, the insurer may terminate the contract by giving reasonable notice to the consumer. This is outlined in paragraph 9 of Schedule 1 to the Act.

The Act applies to contracts for the settlement of a claim arising under a consumer insurance contract, as stated in section 10.

The insurer must refund any premiums paid for the terminated cover in respect of the balance of the contract term if the consumer or insurer terminates the contract due to a careless misrepresentation. This is specified in paragraph 9 of Schedule 1.

A contract for the settlement of a claim arising under a consumer insurance contract is exempt from the provisions of section 10.

The matters that the Act considers when determining the effectiveness of a term in a consumer insurance contract include disclosure and representations by the consumer to the insurer before the contract is entered into or varied, and any remedies for qualifying misrepresentations. These matters are outlined in section 10(2) of the Act.

Here are the key points to remember:

If the qualifying misrepresentation was careless, insurers have several remedies at their disposal. The insurer's remedies are based on what it would have done if the consumer had complied with the duty set out in section 2(2), and paragraphs 5 to 8 are to be read accordingly.

Insurers can choose to avoid the contract and refuse all claims if they would not have entered into the consumer insurance contract on any terms. They must return the premiums paid in this case.

If the insurer would have entered into the consumer insurance contract, but on different terms, the contract is treated as if it had been entered into on those different terms if the insurer so requires. This means the original contract is essentially rewritten with the new terms.

In cases where the insurer would have charged a higher premium, they may reduce proportionately the amount to be paid on a claim. This means the insurer need only pay X% of what it would otherwise have been under an obligation to pay under the terms of the contract.

A consumer's failure to comply with an insurer's request to confirm or amend particulars previously given can be considered a misrepresentation.

If a consumer insurance contract is varied, the insurer may be able to reject all or part of the claim if the consumer has made a qualifying misrepresentation.

A term in a consumer insurance contract that would put the consumer in a worse position regarding disclosure and representations than the provisions of the Consumer Insurance (Disclosure and Representations) Act 2012 is of no effect.

If the subject-matter of a variation can be reasonably treated separately from the rest of the contract, Part 1 of Schedule 1 applies to the variation, with necessary modifications.

Otherwise, Part 1 applies as if the qualifying misrepresentation had been made in relation to the whole contract, rather than just the variation.

Here is a summary of the remedies for qualifying misrepresentations:

Before entering into or varying an insurance contract, it's essential to understand the consumer's obligations. The consumer must take reasonable care not to make a misrepresentation to the insurer.

A misrepresentation can occur if the consumer fails to comply with the insurer's request to confirm or amend particulars previously given. This is a critical aspect of the contract, and consumers must be aware of their duties.

The consumer's duty to disclose information has been replaced by the requirement to take reasonable care in answering the insurer's questions. This shift in responsibility aims to ensure that consumers provide accurate and complete information.

If the consumer volunteers information, they must take reasonable care to ensure that it is not misleading. This means being transparent and honest in their responses to the insurer's questions.

To summarize, the consumer's role in providing accurate information before entering into or varying an insurance contract is crucial. By taking reasonable care to answer questions and avoid misrepresentations, consumers can ensure a smooth and fair contract process.

Here are the key points to remember:

In the UK, variations to consumer insurance contracts are governed by Part 2 of this Schedule.

This Part applies in relation to qualifying misrepresentations made in connection with such variations. The subject-matter of a variation can be treated separately from the rest of the contract if it's reasonable to do so.

If the variation can be treated separately, then Part 1 of this Schedule applies with necessary modifications. This is the same as how it would apply to a contract.

Otherwise, Part 1 applies as if the qualifying misrepresentation had been made in relation to the whole contract, including the variation. This is because the variation is part of the contract.

In cases where the qualifying misrepresentation relates to a specific part of the contract, it's treated as if it related to the whole contract.

The rules for determining agent status can be complex, but it's essential to understand them to avoid any potential issues in contract law.

In the UK, Schedule 2 of the Act sets out the rules for determining whether an agent is acting on behalf of the consumer or the insurer.

The agent is taken as the insurer's agent in specific cases, such as when the agent collects information from the consumer with the insurer's express authority.

The agent is also considered the insurer's agent when they enter into a contract as the insurer's agent, with the insurer's express authority.

In any other case, it's presumed that the agent is acting as the consumer's agent, unless it appears from the relevant circumstances that the agent is acting for the insurer.

The Treasury has the power to update the list of factors that may be relevant in determining agent status, which currently includes factors such as the agent's contractual obligations and the insurer's restrictions on the number of agents they work with.