Law Commission proposals

Negligent life insurance claims will be subject to a five-year non-contestability period, the Law Commission proposes.

In its consultation paper, the Law Commission says “insurers may not refuse claims on the basis of negligent statements after a set period”.

It proposes the set period be five years, unlike the two years in many US states and three for Australia and New Zealand.

The paper says: “Insurers would still be able to avoid for deliberate or reckless mistakes, but not for purely negligent ones. The costs would need to be considered carefully, but we have been told that they are unlikely to be excessive.”

The commission categorises three different type of misrepresentations – deliberate or reckless, reasonable (innocent) and negligent (inadvertent).

If the consumer acts dishonestly, the commission says the insurer would be entitled to ignore the policy and refuse all claims.

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