Main definitions

1 Main definitions

In this Act—

• “consumer insurance contract” means a contract of insurance between—

  (a)

  5an individual who enters into the contract wholly or mainly for
  purposes unrelated to the individual’s trade, business or
  profession, and

  (b)

  a person who carries on the business of insurance and who
  becomes a party to the contract by way of that business
  10(whether or not in accordance with permission for the purposes
  of the Financial Services and Markets Act 2000);

• “consumer” means the individual who enters into a consumer insurance
  contract, or proposes to do so;

• “insurer” means the person who is, or would become, the other party to a
  15consumer insurance contract.

Pre-contract and pre-variation information

2 Disclosure and representations before contract or variation

(1) This section makes provision about disclosure and representations by a
consumer to an insurer before a consumer insurance contract is entered into or
20varied.

(2) It is the duty of the consumer to take reasonable care not to make a
misrepresentation to the insurer.

(3) A failure by the consumer to comply with the insurer’s request to confirm or
amend particulars previously given is capable of being a misrepresentation for
the purposes of this Act (whether or not it could be apart from this subsection).

(4) The duty set out in subsection (2) replaces any duty relating to disclosure or
5representations by a consumer to an insurer which existed in the same
circumstances before this Act applied.

(5) Accordingly—

(a) any rule of law to the effect that a consumer insurance contract is one
of the utmost good faith is modified to the extent required by the
10provisions of this Act, and

(b) the application of section 17 of the Marine Insurance Act 1906 (contracts
of marine insurance are of utmost good faith), in relation to a contract
of marine insurance which is a consumer insurance contract, is subject
to the provisions of this Act.

3 15Reasonable care

(1) Whether or not a consumer has taken reasonable care not to make a
misrepresentation is to be determined in the light of all the relevant
circumstances.

(2) The following are examples of things which may need to be taken into account
20in making a determination under subsection (1)—

(a) the type of consumer insurance contract in question, and its target
market,

(b) any relevant explanatory material or publicity produced or authorised
by the insurer,

(c) 25how clear, and how specific, the insurer’s questions were,

(d) in the case of a failure to respond to the insurer’s questions in
connection with the renewal or variation of a consumer insurance
contract, how clearly the insurer communicated the importance of
answering those questions (or the possible consequences of failing to
30do so),

(e) whether or not an agent was acting for the consumer.

(3) The standard of care required is that of a reasonable consumer: but this is
subject to subsections (4) and (5).

(4) If the insurer was, or ought to have been, aware of any particular characteristics
35or circumstances of the actual consumer, those are to be taken into account.

(5) A misrepresentation made dishonestly is always to be taken as showing lack of
reasonable care.

Qualifying misrepresentations

4 Qualifying misrepresentations: definition and remedies

(1) 40An insurer has a remedy against a consumer for a misrepresentation made by
the consumer before a consumer insurance contract was entered into or varied
only if—

(a) the consumer made the misrepresentation in breach of the duty set out
in section 2(2), and

(b) the insurer shows that without the misrepresentation, that insurer
would not have entered into the contract (or agreed to the variation) at
all, or would have done so only on different terms.

(2) A misrepresentation for which the insurer has a remedy against the consumer
5is referred to in this Act as a “qualifying misrepresentation”.

(3) The only such remedies available are set out in Schedule 1.

5 Qualifying misrepresentations: classification and presumptions

(1) For the purposes of this Act, a qualifying misrepresentation (see section 4(2)) is
either—

(a) 10deliberate or reckless, or

(b) careless.

(2) A qualifying misrepresentation is deliberate or reckless if the consumer—

(a) knew that it was untrue or misleading, or did not care whether or not it
was untrue or misleading, and

(b) 15knew that the matter to which the misrepresentation related was
relevant to the insurer, or did not care whether or not it was relevant to
the insurer.

(3) A qualifying misrepresentation is careless if it is not deliberate or reckless.

(4) It is for the insurer to show that a qualifying misrepresentation was deliberate
20or reckless.

(5) But it is to be presumed, unless the contrary is shown—

(a) that the consumer had the knowledge of a reasonable consumer, and

(b) that the consumer knew that a matter about which the insurer asked a
clear and specific question was relevant to the insurer.

25Specific issues

6 Warranties and representations

(1) This section applies to representations made by a consumer—

(a) in connection with a proposed consumer insurance contract, or

(b) in connection with a proposed variation to a consumer insurance
30contract.

(2) Such a representation is not capable of being converted into a warranty by
means of any provision of the consumer insurance contract (or of the terms of
the variation), or of any other contract (and whether by declaring the
representation to form the basis of the contract or otherwise).

7 35Group insurance

(1) This section applies where—

(a) a contract of insurance is entered into by a person (“A”) in order to
provide cover for another person (“C”), or is varied or extended so as to
do so,

(b) 40C is not a party to the contract,

(c) so far as the cover for C is concerned, the contract would have been a
consumer insurance contract if entered into by C rather than by A, and

(d) C provided information directly or indirectly to the insurer before the
contract was entered into, or before it was varied or extended to
5provide cover for C.

(2) So far as the cover for C is concerned—

(a) sections 2 and 3 apply in relation to disclosure and representations by
C to the insurer as if C were proposing to enter into a consumer
insurance contract for the relevant cover with the insurer, and

(b) 10subject to subsections (3) to (5) and the modifications in relation to the
insurer’s remedies set out in Part 3 of Schedule 1, the remainder of this
Act applies in relation to the cover for C as if C had entered into a
consumer insurance contract for that cover with the insurer.

(3) Section 4(1)(b) applies as if it read as follows—

“(b) 15the insurer shows that without the misrepresentation, that
insurer would not have agreed to provide cover for C at all, or
would have done so only on different terms.”

(4) If there is more than one C, a breach on the part of one of them of the duty
imposed (by virtue of subsection (2)(a)) by section 2(2) does not affect the
20contract so far as it relates to the others.

(5) Nothing in this section affects any duty owed by A to the insurer, or any
remedy which the insurer may have against A for breach of such a duty.

8 Insurance on life of another

(1) This section applies in relation to a consumer insurance contract for life
25insurance on the life of an individual (“L”) who is not a party to the contract.

(2) If this section applies—

(a) information provided to the insurer by L is to be treated for the
purposes of this Act as if it were provided by the person who is the
party to the contract, but

(b) 30in relation to such information, if anything turns on the state of mind,
knowledge, circumstances or characteristics of the individual
providing the information, it is to be determined by reference to L and
not the party to the contract.

9 Agents

35Schedule 2 applies for determining, for the purposes of this Act only, whether
an agent through whom a consumer insurance contract is effected is the agent
of the consumer or of the insurer.

10 Contracting out

(1) A term of a consumer insurance contract, or of any other contract, which would
40put the consumer in a worse position as respects the matters mentioned in
subsection (2) than the consumer would be in by virtue of the provisions of this
Act is to that extent of no effect.

(2) The matters are—

(a) disclosure and representations by the consumer to the insurer before
the contract is entered into or varied, and

(b) any remedies for qualifying misrepresentations (see section 4(2)).

(3) This section does not apply in relation to a contract for the settlement of a claim
5arising under a consumer insurance contract.

Final provision

11 Consequential provision

(1) Any rule of law to the same effect as the following is abolished in relation to
consumer insurance contracts—

(a) 10section 18 of the Marine Insurance Act 1906 (disclosure by assured),

(b) section 19 of that Act (disclosure by agent effecting insurance),

(c) section 20 of that Act (representations pending negotiation of contract).

(2) The Marine Insurance Act 1906 is amended as follows—

(a) in section 18, at the end add—

“(6) 15This section does not apply in relation to a contract of marine
insurance if it is a consumer insurance contract within the
meaning of the Consumer Insurance (Disclosure and
Representations) Act 2012.”;

(b) in section 19, the existing text becomes subsection (1), and after that
20add—

“(2) This section does not apply in relation to a contract of marine
insurance if it is a consumer insurance contract within the
meaning of the Consumer Insurance (Disclosure and
Representations) Act 2012.”;

(c) 25in section 20, at the end add—

“(8) This section does not apply in relation to a contract of marine
insurance if it is a consumer insurance contract within the
meaning of the Consumer Insurance (Disclosure and
Representations) Act 2012.”.

(3) 30In section 152 of the Road Traffic Act 1988 (exceptions to duty of insurers to
satisfy judgment against persons insured against third-party risks), in
subsection (2)—

(a) in paragraph (a), after “avoid it” insert “either under the Consumer
Insurance (Disclosure and Representations) Act 2012 or, if that Act does
35not apply,”;

(b) in paragraph (b), after “policy or security” insert “under that Act or”,
and for “it” substitute “the policy or security”.

(4) In Article 98A of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154S.I. 1981/154
(N.I.)) (exceptions to duty of insurers to satisfy judgment against persons
40insured against third-party risks), in paragraph (2)—

(a) in sub-paragraph (a), after “avoid it” insert “either under the Consumer
Insurance (Disclosure and Representations) Act 2012 or, if that Act does
not apply,”;

(b) in sub-paragraph (b), after “policy or security” insert “under that Act
45or”, and for “it” substitute “the policy or security”.

12 Short title, commencement, application and extent

(1) This Act may be cited as the Consumer Insurance (Disclosure and
Representations) Act 2012.

(2) Section 1 and this section come into force on the day on which this Act is
5passed, but otherwise this Act comes into force on such day as the Treasury
may by order made by statutory instrument appoint.

(3) An order under subsection (2) may not appoint a day sooner than the end of
the period of 1 year beginning with the day on which this Act is passed.

(4) This Act applies only in relation to consumer insurance contracts entered into,
10and variations to consumer insurance contracts agreed, after the Act comes
into force.

In the case of group insurance (see section 7), that includes the provision of
cover for C by means of an insurance contract entered into by A after the Act
comes into force, or varied or extended so as to do so after the Act comes into
15force.

(5) Nothing in this Act affects the circumstances in which a person is bound by the
acts or omissions of that person’s agent.

(6) Apart from the provisions listed in subsection (7), this Act extends to England
and Wales, Scotland and Northern Ireland.

(7) 20In section 11—

(a) subsection (3) extends to England and Wales and Scotland only;

(b) subsection (4) extends to Northern Ireland only.

SCHEDULES

Section 4(3).

SCHEDULE 1 Insurers’ remedies for qualifying misrepresentations

Part 1 5Contracts

General

1 This Part of this Schedule applies in relation to qualifying
misrepresentations made in connection with consumer insurance contracts
(for variations to them, see Part 2).

10Deliberate or reckless misrepresentations

2 If a qualifying misrepresentation was deliberate or reckless, the insurer—

(a) may avoid the contract and refuse all claims, and

(b) need not return any of the premiums paid, except to the extent (if
any) that it would be unfair to the consumer to retain them.

15Careless misrepresentations—claims

3 If the qualifying misrepresentation was careless, paragraphs 4 to 8 apply in
relation to any claim.

4 The insurer’s remedies are based on what it would have done if the
consumer had complied with the duty set out in section 2(2), and paragraphs
205 to 8 are to be read accordingly.

5 If the insurer would not have entered into the consumer insurance contract
on any terms, the insurer may avoid the contract and refuse all claims, but
must return the premiums paid.

6 If the insurer would have entered into the consumer insurance contract, but
25on different terms (excluding terms relating to the premium), the contract is
to be treated as if it had been entered into on those different terms if the
insurer so requires.

7 In addition, if the insurer would have entered into the consumer insurance
contract (whether the terms relating to matters other than the premium
30would have been the same or different), but would have charged a higher
premium, the insurer may reduce proportionately the amount to be paid on
a claim.

8 “Reduce proportionately” means that the insurer need pay on the claim only
X% of what it would otherwise have been under an obligation to pay under

the terms of the contract (or, if applicable, under the different terms
provided for by virtue of paragraph 6), where—

Careless misrepresentations—treatment of contract for the future

9 (1) 5This paragraph—

(a) applies if the qualifying misrepresentation was careless, but

(b) does not relate to any outstanding claim.

(2) Paragraphs 5 and 6 (as read with paragraph 4) apply as they apply where a
claim has been made.

(3) 10Paragraph 7 (as read with paragraph 4) applies in relation to a claim yet to
be made as it applies in relation to a claim which has been made.

(4) If by virtue of sub-paragraph (2) or (3), the insurer would have either (or
both) of the rights conferred by paragraph 6 or 7, the insurer may—

(a) give notice to that effect to the consumer, or

(b) 15terminate the contract by giving reasonable notice to the consumer.

(5) But the insurer may not terminate a contract under sub-paragraph (4)(b) if it
is wholly or mainly one of life insurance.

(6) If the insurer gives notice to the consumer under sub-paragraph (4)(a), the
consumer may terminate the contract by giving reasonable notice to the
20insurer.

(7) If either party terminates the contract under this paragraph, the insurer must
refund any premiums paid for the terminated cover in respect of the balance
of the contract term.

(8) Termination of the contract under this paragraph does not affect the
25treatment of any claim arising under the contract in the period before
termination.

(9) Nothing in this paragraph affects any contractual right to terminate the
contract.

Part 2 30Variations

10 This Part of this Schedule applies in relation to qualifying
misrepresentations made in connection with variations to consumer
insurance contracts.

11 If the subject-matter of a variation can reasonably be treated separately from
35the subject-matter of the rest of the contract, Part 1 of this Schedule applies
(with any necessary modifications) in relation to the variation as it applies in
relation to a contract.

12 Otherwise, Part 1 applies (with any necessary modifications) as if the
qualifying misrepresentation had been made in relation to the whole
40contract (for this purpose treated as including the variation) rather than
merely in relation to the variation.

Part 3 Modifications for group insurance

13 Part 1 is to be read subject to the following modifications in relation to cover
provided for C under a group insurance contract as mentioned in section 7
5(and in this Part “A” and “C” mean the same as in that section).

14 References to the consumer insurance contract (however described) are to
that part of the contract which provides for cover for C.

15 References to claims and premiums are to claims and premiums in relation
to that cover.

16 10The reference to the consumer is to be read—

(a) in paragraph 2(b), as a reference to whoever paid the premiums, or
the part of them that related to the cover for C,

(b) in paragraph 9(4) and (6), as a reference to A.

Part 4 15Supplementary

17 Section 84 of the Marine Insurance Act 1906 (return of premium for failure
of consideration) is to be read subject to the provisions of this Schedule in
relation to contracts of marine insurance which are consumer insurance
contracts.

Section 9.

20SCHEDULE 2 Rules for determining status of agents

1 This Schedule sets out rules for determining, for the purposes of this Act
only, whether an agent through whom a consumer insurance contract is
effected is acting as the agent of the consumer or of the insurer.

2 25The agent is to be taken as the insurer’s agent in each of the following
cases—

(a) when the agent does something in the agent’s capacity as the
appointed representative of the insurer for the purposes of the
Financial Services and Markets Act 2000 (see section 39 of that Act),

(b) 30when the agent collects information from the consumer, if the insurer
had given the agent express authority to do so as the insurer’s agent,

(c) when the agent enters into the contract as the insurer’s agent, if the
insurer had given the agent express authority to do so.

3 (1) In any other case, it is to be presumed that the agent is acting as the
35consumer’s agent unless, in the light of all the relevant circumstances, it
appears that the agent is acting as the insurer’s agent.

(2) Some factors which may be relevant are set out below.

(3) Examples of factors which may tend to confirm that the agent is acting for
the consumer are—