Over twenty years ago doubts were cast on the fairness of the right of insurers to avoid liability because of non-disclosure. In 1957 a Law Reform Committee recommended that "for the purposes of any contract of insurance, no fact should be deemed material unless it would have been considered material by a reasonable insured", but that recommendation never reached the statute books.

This Act requires that the terms and conditions contained in a contract are reasonable and outlaws many small-print exceptions. The Act does not apply to insurance contracts, and this concession was allowed on condition that the insurance industry issue "Statements of Insurance Practice".

Statements of Insurance Practice
 
In 1977 two Statements were issued, one relating to non-life business and the other to long-term business.

Non-life business. The voluntary undertaking relates to policyholders resident in the UK and insured in their private capacity only and covers proposal forms, claims and renewals. A summary of the more salient points is given below. The declaration at the foot of the proposal form should be restricted to the proposer's knowledge and belief; within the declaration or prominently displayed on the proposal, there should be a notice drawing the insured's attention to the consequences of nondisclosure and explaining the nature of a material fact; matters which insurers have found generally to be material must be the subject of specific questions. With regard to claims the insurers will not unreasonably repudiate liability (except in the case of fraud, deception or negligence) on the grounds of misrepresentation or non-disclosure where knowledge of the fact would not have affected the underwriting of the risk materially or on grounds of breach of warranty where the breach was unconnected with the loss. Renewal notices should warn the insured of the duty of disclosure and of changes which have occurred since inception or since last renewal.

Long-term business. The undertaking in respect of proposal forms and claims is in similar terms to those applying to non-life business, but in particular the insurers will not repudiate a claim in respect of non-disclosure or misrepresentation of a metter outside the knowledge of the proposer.
                       
The Law Commission Report No. 104

This report was issued in October 1980, and once again recommendations were made regarding the duty of disclosure and warranties.

The Commission wished to see some of the points dealt with in the Voluntary Statements of Insurance Practice enforced by statute. The main recommendations encompassed the following points:

Material facts. Facts should be disclosed if they would influence the prudent underwriter, and. they are facts which a reasonable applicant would know, should know, or would have made reasonable enquiries about, and are facts which a reasonable man in the position of the proposer would disclose.

Proposal forms. The insured's duty of disclosure should be restricted
to answering to the best of his or her knowledge and belief. The form should contain warnings of the consequences of not giving accurate information, and the insured should be given a copy of the completed form.

Warranties. Insurers should not be able to avoid liability for a breach
of warranty if the breach was not material to the loss.

Basis of contract clauses. Policies sometimes state that the proposal form is the basis of the contract. It is recommended that such undertakings be ineffective with regard to past or present facts.

At this time the recommendations have not been enacted, but since the consumer lobby is much stronger than in 1957 there is a strong possibility that changes in the law will come in the mid-1980s.

The exact wording of questions on proposal forms will be much more important if the recommendations are adopted, and the Commission feel that the contra proferentem rule should apply to the construction of proposal forms as well as policy forms. With regard to warranties, the warranty should be material to the risk and to the loss. In order to shorten proposal forms, certain companies have few questions on their forms, but ask if there are any facts which would influence the underwriter. The commission recommends that such questions should have no effect.

Conclusion

It can be seen in many articles directory that the law with regard to insurance disclosures is about to undergo some change. It is highly unlikely that the recommendations will receive the same fate as those in 1957. In the last two decades, a substantial amount of legislation has been put onto the statute books to protect the individual, and there seems to be no reason why insurance contracts.

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