Mulling over the Consumer Insurance (Disclosure and Representations) Act 2012
The Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA) came into force in April 2013. CIDRA has changed the landscape — it impacts on any insurer or broker dealing with consumer/personal insurance. The principles behind it are also likely to impact on those dealing with commercial policies in the future.
The principles behind the new law are as follows: CIDRA only applies to consumer insurance contracts; there is a fundamental shift away from the policy holder’s duty of full disclosure (ie, the duty of utmost good faith) — that duty is replaced with a duty to take ‘reasonable care’ not to make a misrepresentation to the insurer; where previously complaints from consumers have been decided by the Financial Ombudsman Service (FOS), it would use the principles behind CIDRA anyway to ensure fair outcomes for consumers, so CIDRA therefore gives a statutory footing for the FOS approach; and basis clauses abolished.
The onus is now on insurers to ensure that all material information is obtained through questions put to the proposer — put simply, if you don’t ask, you don’t get. Therefore, the adequateness of the procedures used by insurers to obtain information will need to be assessed in light of this shift…
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