The latest plans to reform the UK’s century-old insurance law must succeed where others have failed, says Kip Berkeley-Herring.
The UK’s Marine Insurance act may seem a very narrow subject. Yet, this hundred-year-old piece of legislation and the plans to reform it will affect insurers, reinsurers and their customers around the world.
Despite its name, it provides the framework for all general insurance activity in the UK. The influence of the London Market and the wide-ranging role of our courts in determining insurance and reinsurance disputes give it international significance.
In 1906 the Act was visionary and state-of-the-art. If anyone were to start from scratch now they would come up with a very different piece of legislation. The only reason it has survived so long is that the task of reforming it is mind-blowing in its complexity.
Now, however, the Law Commission has produced proposals relating to default and the duty of disclosure, with other aspects to follow.
“The only reason the Act has survived so long is that the task of reforming it is mind-blowing in its complexity
Kip Berkeley-Herring Chair, AIRMIC Insurance Steering Group.
AIRMIC (the Association of Insurance and Risk Managers) strongly supports the reform. We believe it will create a more equitable balance between buyers and sellers, increase clarity and reduce the scope for legal disputes. In the process, it will make London a more attractive insurance centre.
We especially endorse the concept of a “reasonable insured” and “reasonable expectation of the insured” plus a move away from implicit warranties. Under the new proposals, policyholders who have behaved “reasonably” would be protected even though they may have failed to grasp the finer legal points of the small print.
We would also welcome the end of implicit warranties. This change would protect, for example, a firm whose sprinkler system had failed. Unless the policy explicitly stated otherwise or they had been negligent in its maintenance, they could reasonably expect a fire claim to be paid.
These proposals will encourage underwriters to ask all the right questions before inception, and they should mean that everyone has a better understanding of what is covered and what is not. Our one concern is that previous attempts at reform going back 50 years have come to nothing. This must not happen again.