UK: Consistency And Simplicity: A Review Of The Consumer Insurance (Disclosure And Representations) Act 2012

The first legislative response to the Law Commission's on-going review of insurance law concerns the obligation placed on consumers to provide information to insurers when taking out insurance. The Act has a narrow focus – targeted only at consumers, so its impact on the aviation insurance market will be most keenly felt in respect of general aviation. So, even though airline insurance and reinsurance, being business-to-business markets, will be relatively unaffected, the Act bears closer attention.

The Act is significant because it amends the principle of utmost good faith – sections 17-20 of the Marine Insurance Act 1906 – by abolishing the positive duty of disclosure and modifying the remedies for misrepresentation. The upshot is that insurers will need to focus on asking clear and comprehensive questions to potential insureds.

This article considers what the act does and why, despite years of work to address a perceived legal inequity, it does not radically alter the position of a consumer with a claim.

The Act was given Royal Assent on 8 March 2012, but will not fully come into force for at least one year from that date. This period allows insurers time prepare for its effect.

Why was the Act thought necessary?

The Law Commission concluded that the law operated unfairly towards consumers due to its complexity and severity. An insured, acting honestly and reasonably, might still have a claim denied. Indeed, an insured might be unaware that the law had been broken.

The law as it stood required the insured to volunteer information or not make a misrepresentation which a hypothetical prudent insurer would consider material. An insured, answering all the questions posed by an insurer, might unwittingly omit information that insurer considered material and so face the insurer's most powerful remedy – avoidance of the insurance contract.

The purpose of the new Act, then, is twofold; to simplify for consumers the application of the various insurance rules (which, aside current law, comprise certain Codes of Practice from the Association of British Insurers, the Financial Ombudsman Scheme (FOS) and the FSA's Insurance Conduct of Business Sourcebook (ICOBS)); and to make an insurer's remedy proportionate to an insured's breach of duty.

Consumer focus

Only section 1 of the Act is currently in force, which provides definitions for what constitutes a consumer insurance contract and who may be considered a consumer. The definition allows for mixed use contracts – ie, contract with individuals contracting wholly or mainly for purposes unrelated to the individual's trade, business or profession. So, even if an aircraft includes some use for business purposes – perhaps flying for client entertainment – the insured may still be 'a consumer' if the main use of the aircraft is not for business.

End of disclosure?

The Act provides that a consumer will have "a duty to take reasonable care not to make a misrepresentation to the insurer". The duty to volunteer information that an underwriter might deem material will therefore be abolished. Practically, an underwriter will have to pose questions to the insured to get desired information, which may mean making the proposal form more comprehensive.

The new duty will be assessed against the objective standard of a "reasonable consumer" and it will be for the insurer to prove that a consumer has failed to take reasonable care. Whether reasonable care has been taken will be determined by taking into account "all relevant circumstances" against the presumption that a consumer will have the knowledge of a reasonable consumer and knew that a clear and specific question from an insurer means that the matter is relevant to the insurer.

There is no provision for a continuing duty; a consumer's disclosure obligations are only active until the contract is made, although post-contact variations are subject to the duty. How a variation will be treated will depend upon whether or not it can be separated from the remainder of the policy.

What is a misrepresentation?

A misrepresentation is an untrue statement of fact made by the consumer prior to the formation of a contract, which induces the insurer to enter into the contract. The Act provides for two categories of "qualifying misrepresentations". They may be either (i) deliberate or reckless (which includes dishonesty) or (ii) careless, which is the default position for a misrepresentation that is neither deliberate nor reckless.

The burden of proving that a misrepresentation is deliberate or reckless falls on the insurer, who will have to show that the consumer knew or did not care whether a statement was untrue or misleading and knew or did not care whether the matter was relevant to the insurer. The latter aspect, again, highlights the need to ensure that well crafted questions are put to potential insureds, which may be especially true for any renewal.

Proportionality – what would the insurer have done differently?

An insurer will be able to refuse a claim and avoid the contract where a consumer deliberately or recklessly makes a misrepresentation. This is a familiar remedy for insurers and includes retention of the premium.

The remedies for a careless misrepresentation are where the Act makes a real difference. They are based on what the insurer would have done if the consumer had complied with its duty to take reasonable care. The options range from avoidance, if the contract would not have been entered into (but returning the premium), to adjusting the terms and reducing the amount to be paid proportionate with any higher premium that might have been charged.

Warranties/basis of contract clauses

The issue of warranties is relatively untouched; an insurer may still include warranties in a policy. However, the Act does provide that no pre-contractual statement shall be converted into a warranty by a term of the contract. Also, a basis of contact clause, which purports to convert all representations into warranties, will not be effective.


Access to the aviation market, especially when involving insurers at Lloyd's, is procured through the services of a broker. It is commonly understood that the broker acts for the insured when placing a risk but this is not always the case. The law of agency is not altered by the Act but it does provide a list of scenarios where a broker will be taken to act for the insurer: if a broker is expressly appointed and acts in representation of an insurer, or is acting as the insurer's agent. Otherwise, the broker will be presumed to be acting for the consumer, especially where the agent undertakes to give impartial advice or to conduct a fair analysis of the market, or where the consumer pays a fee.

Where an agent acts for an insured (which may include a travel agent or an IFA) and makes a misrepresentation, the insured is accountable and this is a factor taken into consideration in determining whether reasonable care has been taken. It is submitted that an insurer would normally have a remedy against the insured.


An insurer will not be permitted to contract out of the Act. Prior to the Act, the remedies for an insurer with an actionable non-disclosure or misrepresentation were limited. The Act will provide courts with a tool to follow the spirit of the ICOBS and FOS, and so avoid the draconian effect of avoidance, which was clearly open to criticism and needed to be tempered. By limiting the ability to avoid a contract, there will be a broad consistency between the various forums for resolving insurance disputes. However, it is this consistency which, it is submitted, means that the impact of the Act will be limited. This is because insurers' strict legal rights are not always applied either by choice or through the operation of the FOS or the FSA rules. Nonetheless, the greater consistency and simplicity of the rules which will result from the Act should benefit both consumers and insurers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Jason Barnes
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.