So, who do you represent?

The English and Scottish Law Commissions first consultation on insurance contract law brought the industry a fairer balance between consumer and business insurance interests, and they clearly have taken on board comments made to them in response to their three earlier issues papers on misrepresentation, non-disclosure and breach of warranty by insureds, as well as the role of intermediaries.

Their stated aim for reform has always focused on the fact that current law does not meet the reasonable expectations of, and is not understood by, consumers. As such they have concentrated on reform that has necessitated a clear consumer and business divide to favour the consumer.

Under current legislation, the consumer insured has to disclose all material facts to the insurer, enabling it to assess the risk, a detail the commissions viewed as unfair. It is the insurer that knows what information it requires and not consumers that are generally not well versed in risk assessment. As such, the bodies have suggested scrapping the duty of disclosure, replacing it with an insurer's obligation to ask clear questions about the information required.

The commissions have always been concerned about the role of intermediaries at the pre-contract stage, fearing that customers are confused about the role of the broker and uncertain as to whom they actually represent. The proposal seeks to make it clear that intermediaries should be treated as the insurer's agent unless they are clearly independent. It is arguable that this will not work because large composite insurers will have thousands of agency agreements with brokers and it seems unrealistic that they could monitor all their intermediaries' actions.

Would it be less confusing for the consumer if the position of the intermediary were made clear early on? It is questionable whether this subject would benefit from a change in the law, and it is arguably a matter best served by regulation. The Financial Services Authority has already undertaken work on increased transparency of customer and intermediary relationships, and so the commissions' concerns in this area may better be addressed in this way.

The commissions have set a deadline for responses on their proposals of 16 November this year.

- Richard Evans Partner, Tom Watkinson Solicitor, Policy Coverage Unit, Beachcroft LL.