Insurance law

Commissioner
David Johnston QC

Team member
Gillian Swanson, Project Manager

We are assisting the Law Commission for England and Wales with this project.

 

Insurable Interest

The requirement for insurable interest means that, for a contract of insurance to be valid, the person taking out the insurance must be affected by the subject matter of the insurance.  They must stand to gain a benefit from its preservation, or to suffer a disadvantage should it be lost or damaged.  There is a view that the current law, particularly for life and life-related insurances such as health and accident cover, is antiquated and overly restrictive.  

After an extended period, the joint consultation on a working draft of the Insurable Interest Bill has now closed.  We are grateful to all those who responded with comments and suggestions.  Now our task is to analyse carefully all of the points which have been put to us and to consider next steps. 

The project on insurance law

The project began in January 2006. The joint team issued a scoping paper, inviting views on which areas of insurance contract law were in need of reform. In the light of the responses received, a paper setting out the scope of the project was published. The first joint consultation paper, published in 2007, covered pre-contract issues in both consumer and business insurance but the emerging scale of the project led the Commissions to introduce a phased programme of work, dealing with pre-contract consumer and business issues separately.

Our first report on Consumer Insurance Law was laid before Parliament in December 2009 and the Consumer Insurance (Disclosure and Representations) Bill was introduced in the House of Lords under the Special Bills Procedure in May 2011. The Bill, now the Consumer Insurance (Disclosure and Representations) Act 2012, received Royal Assent on 8 March 2012 and came into force on 6 April 2013. 

The Law Commissions' second joint consultation paper (2011) covered post contractual issues: damages for late payment, remedies for fraudulent claims, insurable interest and policies and premiums in marine insurance. Our third joint consultation paper (2012) covered disclosure in business insurance and warranties. Some of the results of these consultations fed into the second Report and draft Bill, published on 17 July 2014. That Report covered disclosure in business insurance, warranties, remedies for fraudulent claims, and late payment and was largely implemented by the Insurance Act 2015. The Insurance Act 2015 has been amended by the Enterprise Act 2016, Part 5, to include our recommendations on damages for late payment. 

The Insurance Act 2015 also included provisions relating to the Third Parties (Rights against Insurers) Act 2010 so that it could be updated and brought into force.   The 2010 Act, which also derived from recommendations made by both Law Commissions, simplifies the procedure by which third parties can claim against an insurer when the insured is, in broad terms, insolvent or has been dissolved. Regulations making the necessary changes (the Third Parties (Rights against Insurers) Regulations 2016) were made and the 2010 Act was brought fully into force on 1 August 2016.

All of the above-mentioned Commission papers, and other papers published in relation to the project, can be accessed by means of the links below.


Summary table of papers published so far:

January 2006 News Release on the Scoping Paper and the Scoping Paper
August 2006 Analysis of Responses and Decisions on Scope
September 2006 Issues Paper 1 - Misrepresentation and Non-Disclosure
November 2006 Issues Paper 2 - Warranties
March 2007 Issues Paper 3 - Intermediaries and Pre-Contract Information
July 2007 Joint Consultation Paper on Insurance Contract Law: Misrepresentation, Non-Disclosure and Breach of Warranty by the Insured (SLC DP134; LC CP 182); Key Proposals with Examples; News Release and Summary of the paper
January 2008 Issues Paper 4 - Insurable Interest and Summary of the paper
May 2008 Summary of responses on consumer insurance contract law
October 2008 Summary of responses on business insurance contract law
March 2009 Insurance intermediaries and pre-contractual information: a policy statement
April 2009 Issues Paper 5 - Micro-businesses
November 2009 Summary of responses to Issues Paper 5: Micro-businesses
December 2009 Joint Report on Consumer Insurance Law: Pre-Contract Disclosure and Misrepresentation
March 2010 Issues Paper 6 - Damages for Late Payment and the Insurer’s Duty of Good Faith
July 2010 Issues Paper 7 - The Insured's Post-Contract Duty of Good Faith
July 2010 Issues Paper 8 - The Broker's Liability for Premiums: Should Section 53 be Reformed?
October 2010 Issues Paper 9 - The Requirement for a Formal Marine Policy:  Should Section 22 Be Repealed?
November 2010 Summary of responses to Issues Paper 6: Damages for Late Payment and the Insurer’s Duty of Good Faith
December 2010 Summary of responses to Issues Paper 7:  The Insured’s Post-Contractual Duty of Good Faith
April 2011 Summary of responses to Issues Paper 8: The Broker's Liability for Premiums: Should Section 53 be Reformed?
April 2011 Summary of responses to Issues Paper 9: The Requirement for a Formal Marine Policy: Should Section 22 be Repealed?
December 2011 Joint Consultation Paper on Post Contract Duties and other Issues (SLC DP152; LC CP201); summary, impact assessment and news release; separate news release on late payment of claims.
June 2012 Joint Consultation Paper on the Business Insured’s Duty of Disclosure
and the Law of Warranties
(SLC DP155; LC CP204 ); Summary; News
Release
; Impact Assessment; Memorandum prepared for the Law
Commissions by David W Kenna.
December 2012 Summary of responses to Joint Consultation Paper on Post Contract Duties and other Issues - Damages for Late Payment
December 2012 Summary of responses to Joint Consultation Paper on Post Contract Duties and other Issues - Insurers Remedies for Fraudulent Claims
February 2013 Summary of responses to Joint Consultation Paper on Post Contract Duties and other Issues - Insurable Interest
February 2013 Summary of responses to Joint Consultation Paper on Post Contract Duties and other Issues - Policies and Premiums in Marine Insurance
March 2013  Summary of responses to Joint Consultation Paper on The Business Insured's Duty of Disclosure and the Law of Warranties - Disclosure
March 2013  Summary of responses to Joint Consultation Paper on The Business Insured's Duty of Disclosure and the Law of Warranties - Warranties
January 2014 Insurance Contract Bill: first available clauses
January 2014 Insurance Contract Bill: accompanying notes to first available draft clauses
March 2014 Insurance Contract Bill: draft clauses (warranties)
March 2014 Insurance Contract Bill: draft clauses (remedies for fraudulent claims)
March 2014 Insurance Contract Bill: draft clauses (contracting out)
March 2014 Insurance Contract Bill: accompanying notes on draft clauses on warranties etc
June 2014 Draft Insurance Contracts Bill
June 2014 Draft Explanatory Notes
July 2014 Joint Report on Insurance Contract Law: Business Disclosure; Warranties; Insurers' Remedies for Fraudulent Claims; and Late Payment (Law Com No 353; Scot Law Com No 238);  summary; and news release.
November 2014 The Duty Of Fair Presentation Under The Insurance Bill: How Does It Affect Insurance Taken Out For Multiple Parties
March 2015 Issues Paper 10 - Insurable Interest: updated proposals
April 2016

Draft Bill on Insurable Interest, accompanying notes and summary of responses to Issues Paper 10

April 2016

Insurable Interest and Parametric Policies

June 2018

Draft Bill on Insurable Interest, accompanying note with questions and response form

 

Contact

If you require any further information on the Insurance Contract Law project, or if there are matters you wish to raise, please email: gillian.swanson@scotlawcom.gsi.gov.uk.

If you would like to be kept informed of future publications and events we should be happy to add you to our email mailing list on request.