HC Deb 28 July 1977 vol 936 cc641-4W
Mr. Ward

asked the Secretary of State for Trade whether he will add to his statement of 4th May on a code of practice for the insurance industry.

4. Mr. Clinton Davis,

pursuant to his reply [Official Report, 21st July 1977; Vol. 935, c. 660], gave the following information:

The Chairman of the Life Offices' Association and the Associated Scottish Life Offices have now sent me a statement of long-term insurance practice in the following terms:

STATEMENT OF LONG-TERM INSURANCE

PRACTICE

This statement relates to long-term insurance effected by individuals resident in the United Kingdom in a private capacity. Although the statement is not mandatory, it has been recognised by members of the Life Officers' Association and the Associated Scottish Life Offices as an indication of insurance practice, it being understood that there will sometimes be exceptional circumstances where the statement would be inappropriate.

Industrial life assurance policyholders are already protected by the Industrial Assurance Acts 1923 to 1968 and regulations issued thereunder, to an extent not provided for ordinary branch policyholders. The statement will, therefore, be modified in its application to industrial assurance business in discussion with the Industrial Assurance Commissioner.

Life assurance is either very largely or else entirely a mutual enterprise and the aim of the industry in recent years has been to reduce to a minimum the formalities—and therefore the expense to the policyholder—involved in issuing a new life policy subject only to the need to protect the general body of policyholders from the effects of non-disclosure by a small minority of proposers.

Claims (a) An insurer will not unreasonably reject a claim. (However, fraud or deception will, and negligence or non-disclosure or misrepresentation of a material fact may, result in adjustment or constitute grounds for rejection). In particular, an insurer will not reject a claim on grounds of non-disclosure or misrepresentation of a matter that was outside the knowledge of the proposer.

(b) Under any conditions regarding a time limit for notification of a claim, the claimant will not be asked to do more than report a claim and subsequent developments as soon as reasonably possible.

Proposal forms. (a) If the proposal form calls for the disclosure of material facts a statement should be included in the declaration, or prominently displayed elsewhere on the form or in the document of which it forms part:—

  1. (i) drawing attention to the consequences of failure to disclose all material facts and explaining that these are facts that an insurer would regard as likely to influence the assessment and acceptance of a proposal;
  2. (ii) warning that if the signatory is in any doubt about whether certain facts are material, these facts should be disclosed.
  1. (b) Those matters which insurers have commonly found to be material should be the subject of clear questions in proposal forms.
  2. (c) Insurers should avoid asking questions which would require knowledge beyond that which the signatory could reasonably be expected to possess.
  3. (d) The proposal form or a supporting document should include a statement that a copy of the policy form or of the policy conditions is available on request.
  4. (e) A copy of the proposal should be made available to the policy holder when an insurer raises an issue under that proposal—information not relevant to that issue being deleted where necessary to preserve confidentiality.

Policies and accompanying documents. Life assurance policies or accompanying documents should indicate:—

  1. (a) the circumstances in which interest would accrue after the assurance has matured; and
  2. (b) whether or not there are rights to surrender values in the contract and, if so, what those rights are.

[NOTE. The appropriate sales literature should endeavour to impress on pro-posers that whole life or endowment assurance is intended to be a long-term contract and that surrender values, especially in the early years, are frequently less than the total premiums paid.]

Commencement. Any changes to insurance documents will be made as and when they need to be reprinted but the statement will apply in the meantime. The Chairman of the Linked Life Assurance Group has also written to inform me that the terms of the statement are acceptable to the member companies of the Group on the same basis as to members of the LOA and ASLO.

The British Insurance Brokers' Association is asking its members to act in accordance both with this statement and with that drawn up by the British Insurance Association and Lloyd's in respect of non-life insurance business—[Official Report. 4th May 1977, Vol. 931, c.217–220]—insofar as the two statements are applicable to insurance brokers.

The British Insurance Association and Lloyd's have also notified to me the following amendments to the statement I announced on 4th May:—

  1. (i) in the first sentence of the statement the word "domiciled" should read "resident"; and
  2. (ii) in the last sentence of paragraph 2 the words "The previous paragraph…" should read "The previous paragraph 2 (b)…".