Page 22 - Insurance Times March 2023

The motor policy is possibly the best-drafted policy available A qualifying misrepresentation is either (a) deliberate or
in India, for it extensively protects policyholders' interests. reckless - the remedy may be to avoid the contract and
Unfortunately, most insurers don't understand the refuse all claims, and need not return any of the premiums
implication of the word 'Condition precedent to liability. It paid, or b) careless. Any misrepresentation that is not
only prejudices the claim in question in the event of a breach deliberate or reckless is called careless or innocent
and not the policy as a whole. It also doesn't affect claims negligence. Deliberate or reckless misrepresentation takes
paid before or to be paid after this claim that is free of place when the consumer knows that the information
violations. furnished is untrue or misleading or doesn’t not care
whether or not it is untrue or misleading, and (b) knows that
Contract certainty is attained when the insured and insurers the matter to which the misrepresentation is related is
agree on all terms before inception. The agreement often relevant to the insurer, or doesn’t care whether or not it is
remains flawed as both the insured and the insurer don’t relevant to the insurer. However, the insurer has to prove
understand the terms, primarily because of the complex that the qualifying misrepresentation is reckless or
language used to describe the terms. The implications of deliberate. The insurer’s remedies have been laid down in
specific policy terms are not explained to policyholders. In schedule 1 of the act.
health policies,efforts have been made to define specific
terms. Unfortunately, the word ‘ Treatment ‘has not been The insurer may void the contract and decline all claims in
defined even in health policies. case of deliberate or reckless misrepresentations. It may
even have to return the premium without being unfair to
Two acts in English law – 1. Consumer Insurance (Disclosure the consumer.
and Representations) Act 2012 (‘2012 Act’) in consumer
insurance and the Insurance Act 2015 (IA 2015) in non- Incase of careless misrepresentation, the insurer may avoid
consumer insurance made significant changes in keeping the contract and decline all claims, If the insurer would not
with the changing aspirations of the customers. In the past, have entered into the consumer insurance contract on any
insurance contracts were of Utmost Good Faith as per terms. In such a case, they should return the premium paid.
Section 17 of the Marine Insurance Act 1906. As a result,the There has been significant relief given to consumers, and
insurer and insured needed to deal honestly during their this is evident when the act mentions that If an insurer had
contractual relationship. The remedy of this breach was the entered into the consumer insurance contract irrespective
avoidance of the insurance contract itself. The 2012 Act of the terms relating to matters other than the premium
introduced pre-contract and pre-variation information with would have been the same or different, and would have
the duty to take reasonable care not to make a charged a higher premium, the insurer may reduce
misrepresentation. The duty, as mentioned above, replaces proportionately the amount to be paid on a claim.
any duty relating to disclosure or representations by a
consumer to an insurer that existed in the same Many claims declined in the Indian market today would have
circumstances before the enactment of this act. This section been paid due to the above clause. But such changes have
provides information about a consumer's disclosure and not been incorporated in the amended Insurance laws (act
representations to an insurer before a consumer insurance 2015, leaving room for misleading interpretations. This
contract is entered into or varied. harms the interests of the consumers also.

The act clarifies whether or not a consumer has taken Contract Certainty’ can be achieved by proper
reasonable care not to make a misrepresentation is to be comprehensions of terms during pre-sale and can be
determined in the light of all the relevant circumstances, consolidated by effective dispute resolution mechanisms’
e.g.how clear and how specific the insurer’s questions were. (post-sales servicing). Contract Certainty is also accomplished
The concept of qualifying misrepresentation has been by aligning with fundamental Insurance Principles like
introduced as a measure of remedy that the insurer has insurable interest, good faith ‘proximity cause’,
against the insured for misrepresentation. ‘contribution’, ‘subrogation’, and Indemnity.

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