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A bill has been introduced to the UK Parliament that will update the 100-year-old rules governing contracts between businesses and insurers.

According to the UK Government, the Insurance Bill will introduce a more modern legal regime that will benefit both insurers and their business customers by increasing transparency and certainty over the rules that govern contracts between them, and by reducing the number of legal disputes over time.

This will mean that British insurers are better equipped to compete against their global competitors, some of whom have already introduced more modern legal regimes for insurance, while businesses are expected to benefit by around £100 million over the next ten years, as a result of factors such as lower litigation and transaction costs.

The bill is the product of recommendations made to the Government by the Law Commission and the Scottish Law Commission following eight years of consultation with businesses and insurers. The reforms it contains cover three main areas:

  • Disclosure and misrepresentation in business and other non-consumer insurance contracts. The bill amends the duty on business policyholders to disclose risk information to insurers before entering into an insurance contract, introducing a duty of “fair presentation” of the risk. It also provides the insurer with a number of proportionate remedies for breach of the duty of fair presentation.
  • Warranties. The bill abolishes “basis of the contract” clauses, which have the effect of converting pre-contractual information supplied to insurers into warranties without further discussion. It also provides that the insurer’s liability should be suspended, rather than discharged, in the event of a breach of warranty, meaning insurance coverage is restored after a breach of warranty has been remedied.
  • Insurers’ remedies for fraudulent claims. The bill provides the insurer with clear, robust remedies when a policyholder submits a fraudulent claim.

Contains public sector information licensed under the Open Government Licence v2.0.

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