Insurance contract law and regulation and competition in the UK insurance industry: The missing link

Date01 February 2000
DOIhttps://doi.org/10.1108/eb025038
Pages140-150
Publication Date01 February 2000
AuthorLisa Martine Bowyer
SubjectAccounting & finance
Journal
of
Financial Regulation
and
Compliance
Volume
8
Number
2
Insurance contract law and regulation and
competition in the UK insurance industry:
The missing link
Lisa Martine Bowyer
Received (in revised form): 15th November, 1999
1
Kingsland
Court,
Stone,
Staffordshire
ST15 8FW; tel: + 44
(0)1785
818740; e-mail:
lmbowyer@aol.com
Dr Lisa Bowyer is a Senior Lecturer in Law
at Staffordshire University Law School. She
has carried out research into the UK' non-
life insurance industry since 1994. In 1997
she was seconded to the Insurance
Ombudsman Bureau as a researcher.
ABSTRACT
With all the events surrounding the setting up
of the new Financial Services Authority, the
issue of
insurance
contract law reform has yet
again
fallen by the wayside. These two matters
are however, more closely linked than would
first appear.
The most recent
proposals
for the reform of
insurance
contract
law were put forward by the
National Consumer Council1 in 1997 but have
fallen on deaf
ears.
Previously, the wealth and
influence of the UK insurance industry lobby
has been widely
regarded
as the primary reason
for the failure of past governments to take
action to implement
recommended changes
to the
law.2 The power and motives of the govern-
ments themselves should not, however, be
underestimated. Furthermore, it is important
that the issue
does
not fall foul of
a
political dis-
pute and that the law reform debate should take
place
according
to the current
and
future objec-
tives of society, whatever they may be.
THE SPECIAL NATURE OF INSURANCE
In the UK, insurance contracts have often
been treated differently to other types of
contract by both the judiciary and the
legislature. In particular, as Hasson notes,
'English rules of insurance are more
oppressive to the insured than are the
ordinary rules of contracts'.3 A reason for
this differential treatment might be that the
law followed from the nature of the indus-
try as the common law developed along-
side the customs of the trade. It is even
more surprising therefore that dramatic
changes in the practice of insurance, parti-
cularly in relation to the domestic market,
have not led to changes in the legal princi-
ples.
A matter that also requires examination
is that general insurance is treated differ-
ently in terms of its regulation and the
application of competition rules. This may
be due to its importance to the nation4 and
this is more closely examined below.
PROBLEMS WITH ENGLISH INSURANCE
CONTRACT LAW
The National Consumer Council (NCC)
has set out what it sees the problem with
insurance contract law to be.5 This report,
of course, focuses on the negative effects on
consumers of insurance who contract in
their personal capacity. Many of the pro-
blems identified there can, however, be
seen as detrimental to the whole basis of
contracting and negotiating for insurance
and, therefore, the industry as a whole. As
Journal of Financial Regulation
and Compliance, Vol. 8, No. 2,
2000,
pp. 140-150
© Henry Stewart Publications,
1358-1988
Page
140

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