Consumer Insurance

For consumer insureds, the Consumer Insurance (Disclosure and Representations) Act 2012 replaced the duty to disclose material facts with a duty to take reasonable care not to make a misrepresentation to the insurer before the insurance contract is entered into.

A statement can be a misrepresentation if it is incomplete, even if it is literally true.

If an insured doesn’t reply to a request to confirm or amend particulars previously given, this can be a misrepresentation.

What is meant by reasonable care?

What is meant by reasonable care? The Act states that this will be decided in the light of all the relevant circumstances and gives examples of things which may be taken into account:

The type of consumer insurance and its target market.

Relevant explanatory material produced or authorised by the insurer.

How clear and specific the insurer’s questions are.

On renewal, if the insured doesn’t respond to questions from the insurer, how clearly the insurer communicated the importance of answering those questions (or the consequences of failing to answer them).

Whether or not an agent, for example an insurance broker, is acting for the insured.

The standard of care is objective, being that of a reasonable consumer. But if the insurer is, or ought to be, aware of any particular characteristics or circumstances of the particular consumer, they will be taken into account.

If a misrepresentation is made dishonestly, this will always be taken to show a lack of reasonable care and the insured will have breached the duty.


The insurer’s remedy depends on whether the breach of the duty not to make a misrepresentation is:

  • Deliberate or reckless
  • Careless.

Deliberate or reckless: the insurer can avoid the contract (and retain premium paid, unless that would be unfair to the consumer). Deliberate or reckless means that the insured either knows that the misrepresentation is untrue or misleading (or does not care whether it is) and knows that what is misrepresented is relevant to the insurer (or does not care whether or not it is). This is for the insurer to prove.

Careless: a scheme of proportionate remedies applies, depending on what the insurer would have done if the insured had complied with the duty.

  • If the insurer would not have entered into the contract on any terms, it can avoid the contract and refuse to pay claims (but must return the premium).
  • If the insurer would have entered into the contract on different terms (for example by including an exclusion or excess), the policy is treated as though the different terms apply.
  • In addition, if the insurer would have charged a higher premium, a claim is reduced proportionately using the formula set out in the Act. If, for example, the insurer would have charged a premium of £200 but the premium actually charged was only £100, the claim is reduced by 50%.

If a misrepresentation is careless but doesn’t relate to an outstanding claim and the insurer would not have written the risk (or only on different terms) or charged a higher premium, the insurer can:

  • Give notice to that effect to the insured (in which case the insured has the option to terminate the contract), or
  • (except in the case of life insurance policies) give reasonable notice to terminate the contract.