There have been significant changes in the insurance and reinsurance legislative landscape in the UK over the past year, and the rest of 2013 promises even more

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Consumer insurance contract law has undergone major changes since the Consumer Insurance (Disclosure and Representations) Act 2012 came into force on 6 April 2013.

One of the changes it has brought in is that consumers are no longer required to volunteer material facts when seeking insurance; instead, they are only obliged to take reasonable care to answer the insurer’s questions fairly and accurately and not make a misrepresentation

If consumers do misrepresent themselves, the act entitles insurers to different remedies depending on the consumer’s state of mind when they did so - that is, whether it was done carelessly, deliberately
or recklessly.

Changes are also expected in relation to business insurance contract law and the law on warranties. The Law Commission published a final paper on its proposed reforms to this area in July 2012, and a draft bill is expected at the end of 2013.

The view from Europe

Consultations on insurance contract law reform have also been going on at a European level, with the establishment of an expert group tasked with analysing whether differences in the contract laws of the member states create an obstacle to European cross-border trade in insurance products.

Last year, new gender rules came into force. Following the Test-Achats decision by the European Court of Justice in March 2011, the UK government amended the Equality Act 2010 to mean that from 21 December 2012 gender-based pricing in contracts of insurance would be prohibited.

Further European-led developments include the legislative proposals for a new insurance mediation directive published by the European Commission in July 2012, which, if adopted, would have a significant impact on the way intermediaries conduct their business. The UK government will opt into this regime, which is expected to come into force in 2015.

Major changes in UK

There have also been major changes this year to the UK insurance regulatory regime, following the Financial Services Act 2012, which came into effect on 1 April 2013. This abolished the Financial Services Authority and created three new regulatory institutions: the Financial Policy Committee (FPC), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

Under this new system, insurance companies are dual-regulated, in that they are authorised, prudentially regulated and supervised by the PRA and regulated for conduct purposes by the FCA. Insurance intermediaries are solely regulated by the FCA.

A focus for regulators

Insurance has been a focus for regulators over the past year and this looks likely to continue under the new regime. The new Insurance Conduct of Business Sourcebook rules on packaged bank accounts came into effect on 31 March 2013.

Changes it introduced included the requirement for applicable firms to check whether a customer is eligible to claim under each policy and the requirement to send out annual eligibility statements.

In December, the FSA also launched a study into general insurance products sold as add-ons, focusing on whether there are features of the add-ons market that weaken competition and lead to consumer detriment.

It can be assumed that the new regulators will want to make their mark on the UK regulatory landscape, so expect further initiatives in the course of 2013.

Sarah Johnson is associate at Hogan Lovells

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