Insurance providers could be forced to underwrite policies at the pointof-sale not point-of-claim under the terms of an insurance bill passing through parliament.
The Consumer Insurance (Disclosure and Representations) Bill had its first reading in the House of Lords on May 16. It is due to have its second reading today, during which its details will be debated.
The bill means insurers must ask consumers specific questions to obtain all the information they need to assess risk before selling an insurance product, replacing the previous requirement for consumers to volunteer all relevant information.
Kevin Paterson, sales and marketing director at Assurant Intermediary, says the change will require providers and brokers to go into far more detail when selling insurance products.
He says: “This legislation re moves the long-established in sur ance principle that it is up to consumers to volunteer information. Instead the onus will be on insurers and brokers, who will no longer be able to hide behind the buyer beware guidelines.
“Taken to its logical conclusion, the bill will require providers to underwrite products upfront.”
Paterson adds that mortgage brokers selling insurance will have to ensure every detail of the policy is disclosed and understood by consumers at point-of-sale.
He says: “This puts a significant onus on brokers to ensure they go into more detail than they may have in the past.”
Peter Staddon, head of technical services at the British Insurance Brokers’ Association, says the bill will place an extra burden on brokers and they need to interpret it correctly. But he adds: “The legislation will be beneficial to brokers and consumers because it will provide clarity from the point-of-sale and make claim disputes easier to resolve.”
The Financial Services Authority has supported the bill, saying in its general insurance news letter last week that it will provide better protection for consumers and reduce administrative costs to the industry.