Plan to tackle insurance refusals

The cost of insurance is one of the many that affect people's personal finances

Insurers would be required to ask more relevant questions of consumers before issuing them with an insurance policy, under new government plans.

Many people have been refused pay-outs after insurers discovered that the individuals failed to supply vital information when the policy was bought.

Now the government wants to shift the emphasis from a duty on the consumer to disclose information, to insurers having to ask the correct questions.

The law has changed little since 1906.

Mark Hoban, financial secretary to the Treasury, said that the law had become complex and confusing for customers, and expensive for the industry to administer.

"These [reforms] will provide a better deal for the consumer, while saving money for the industry and giving people the certainty they need when taking out insurance," he said.

The move has been welcomed by the Trading Standards Institute which has been campaigning for a change in the law, which it described as "heavily weighted against consumers".

The TSI pointed out that insurers could currently refuse a claim, even if the customer had honestly and reasonably answered all of the questions that were asked when signing up.

"Like other ancient laws devised solely for business, consumer insurance law is totally inappropriate for consumers in the modern age and often leads to great hardship for consumers - sometimes when there is already the stress of serious illness," said David Sanders, TSI lead officer for civil law.

The changes have been proposed in the Consumer Insurance (Disclosure and Representations) Bill.