Press releases

Consumers Paying the Price for Antiquated Insurance Law

An archaic law leaving consumers vulnerable at their hour of need must urgently be reformed, says the Trading Standards Institute (TSI).

Current legislation enables insurers to reject a critical illness policy claim if an undisclosed condition is discovered - even if it is unrelated to the illness suffered by the claimant. The case of a leukaemia sufferer whose claim was not paid because she had omitted to mention in her application form unrelated ear infections suffered in the past is a typical example.

Paul Ramsden, deputy chief executive of TSI, said:  ‘People claiming on a critical illness policy will be going through a very difficult time in their lives and should not have this additional worry.  The law needs amendment to treat the claim in an appropriate manner in the first place. 
‘The current legal situation is letting down consumers through a significant imbalance against consumers.  We would like to see swift government action to act upon this by reforming the current law and creating better regulation for consumers and business.’

Law Commission commissioner David Hertzell is keen to support TSI's campaign to push for a law reform as soon as possible.
He said: ‘Current insurance law dates back to a time when there were no consumers.  The economic and social context was very different from what we have today.
‘The insurance industry has recognised the problem and has issued guidelines to limit this. However these are voluntary and unlike law reform do not provide a comprehensive solution.’

Consumers can take their case to the Financial Ombudsman Service, who will take a fair and reasonable view, and is likely to uphold the initial claim. 
The service received 50,000 insurance disputes last year.
But lead financial ombudsman Peter Hinchliffe said:  ‘Settlement through the financial ombudsman gives consumers good protection, but not all cases qualify for this route.  Some consumers might also be deterred by insurers or by their own advisers ' explanation of the legal position, leaving the consumer with little chance of an appropriate redress.’

For further information or to arrange an interview please contact the Trading Standards Institute press office by phone on 08456 089 430 or by e-mail on


* British insurance law is largely codified in the Marine Insurance Act 1906

* The matter was discussed at an All Party Parliamentary Group for Consumer Affairs and Trading Standards (CATS) meeting on 19 May attended by key stakeholders.

The meeting included government, charity and industry representatives.  There was a shared sense of urgency in the room to codify current best practice in order to make law fair to consumers who act honestly and reasonably. 

* An example of a misrepresentation case referred to the Ombudsman:
Mrs C made a claim under a critical illness policy after she was diagnosed as suffering from leukaemia. The insurer rejected the claim because when completing the application form her husband had inadvertently omitted to mention that she had suffered from unrelated ear infections and resultant loss of hearing.

* The English and Scottish Law Commissions are expected to issue a report later this year.  It is anticipated that the Commissions' recommendations will largely follow the line taken in a consultation paper they issued in 2007:
* Misrepresentation - consumers will be expected to act honestly and reasonably. Hence deliberate or reckless misrepresentation will still entitle the insurer to withdraw cover from outset and reject any claim.

In contrast, if the consumer has been honest and careful, the policy will remain in force and any claim will be met. If the misrepresentation is negligent the remedy will be based on what the insurer would have done had it known the true facts. For example, in the case of Mrs C, this would mean an exclusion relating to hearing loss would be added to the policy but the leukaemia claim would be paid in full.

* Non-disclosure - the duty on consumers to volunteer information will be abolished. Consumers' rights will no longer be dependent on their ability accurately to look into the mind of a prudent insurer to establish what should be disclosed.
* Warranties - a breach of warranty will not lead to the rejection of a consumer's claim unless there is a causal connection between the breach and the loss that has occurred.

* The complete 2007 joint consultation document of the Law Commission and the Scottish Law Commission ‘Insurance Contract Law - Misrepresentation, Non-disclosure and Breach of Warranty by the Insured’ can be found at

A summary of responses on the consumer insurance reform can be found at

Trading Standards Institute
Trading Standards Institute has represented the interests of Trading Standards professionals for 120 years. We have a long and proud history of ensuring that the views of our members are well represented at the highest level of government, both nationally and internationally.
Our aim is to promote excellence and enhance the professionalism of our members in support of empowering and informing consumers, encouraging and working with honest businesses, targeting rogue traders and rogue trading practices and contributing to the health, welfare and wellbeing of citizens and communities.
TSI members are engaged in delivering frontline trading standards services in local authorities in response to 2 million consumer and business complaints and enquiries each year. They also support the delivery of new initiatives such as Consumer Direct, providing first point of contact practical consumer advice.
They also work in the business, consumer and central government sectors in promoting and influencing the safety, prosperity and enhancement of individuals and markets with a dependency on effective and professional trading standards contributions and interventions.
The Law Commissions
The Law Commissions are statutory independent bodies created by the Law Commissions Act 1965 to keep the law under review where it is needed.
The All Party Parliamentary Group on Consumer Affairs and Trading Standards
The All Party Parliamentary Group on Consumer Affairs and Trading Standards exists in order to:
* Promote the charter of consumer rights
* Consider consumer legislation and related matters
* Help the recipients of goods and services and promote the delivery of high quality customer services and to
* Liaise with other All-Party Parliamentary Groups
The Group is an officially registered all party group in Parliament and was established in 1996. The meetings are supported by the Trading Standards Institute, which acts as the Secretariat.
The APPG-CATS is composed of twenty qualifying members, representing the three main political parties. Austin Mitchell MP chairs the Group, alongside the vice-chairs Norman Baker MP, Lord Borrie and Baroness Wilcox. The Secretary is Michael Jabez Foster MP.