Policyholders are getting a raw deal because insurance law is archaic. Which? is calling for a review so you are not penalised for failing to disclose something you did not think was relevant.
Under current insurance law, policy applicants must tell their travel or private medical insurer anything that may make an impact on a subsequent claim. If the provider concludes that they failed to disclose a pertinent fact, it can dismiss the claim. According to Which?, this is unfair, because the customer is not an expert in travel or medical insurance and may honestly not realise that a condition or illness they suffered in the past is relevant when buying a policy.
The current law stems from the Marine Insurance Act (1909). This piece of legislation was introduced to make it easier for experts to negotiate business, and made it mandatory that they disclose all important facts. However, the average insurance customer is no legal or insurance expert. Which? believes that the law as it stands penalises lay-people for not revealing information they didn't feel was relevant or have forgotten about.
The Financial Ombudsman Service (FOS) deals with more than 1,000 cases a year where claims are refused because of non-disclosure. HM Treasury believes that many more such disputes are never taken to FOS.
Lucy Widenka of Which? says: “We are calling for the law to be updated to ensure that consumers know their rights and are confident in the product their are buying.”
Health insurance: News update: 3 November 2010