Press Release

Insurance Law in the 21st century

03 May 2006 

A new in-depth online fact file published by the Chartered Insurance Institute shows that for personal insurances the Financial Ombudsman Service (FOS) has almost entirely replaced the courts.

It is generally assumed that insurance contract law is all about legislation and, especially, case law – complex webs of precedents stretching back hundreds of years into the past. While this may still be the case for commercial business the FOS is having a major impact on personal insurances as the fact file The Financial Ombudsman Service and general insurance outlines.

But the FOS doesn't publish individual decisions and the insurance law books have little to say about them. To plug this gap, the new fact file provides an in-depth grounding in the work of the FOS on general insurance.  It takes relevant material from 50 issues of Ombudsman News published by the FOS since January 2001 and analyses it by theme and class of business.  This material is set into context with an explanation of the background to the FOS and an outline of its powers.   

CII head of information services Robert Cunnew says, “The FOS is cheaper (it’s actually free), less formal, and able in most cases to make decisions that are ‘fair and reasonable in all the circumstances’ – the advantages of the FOS for the consumer are clear.  As small businesses become aware of their right to refer matters to the FOS, a similar trend may develop.

“This means all involved with general insurance underwriting and claims need a good working knowledge of the principles and standards established by the FOS.  What level of disclosure can you reasonably expect on a household proposal form? If you suspect fraud in a small business claim, what are your options?  In what circumstances may a private motor car be regarded as ‘unattended’ prior to its theft?  When drafting private health insurance documentation, what steps do you need to take to ensure that an exclusion clause will be enforceable?  The FOS may well give a different answer to that provided by the insurance law books.” 

The FOS is not a regulator and the decisions of an ombudsman do not form binding precedents.  Nevertheless, those who ignore the principles on which such decisions are based are unlikely to find their positions supported by the FOS, and may in some circumstances attract the eye of the Financial Services Authority.

The fact file has been written by Peter Tyldesley, the solicitor responsible for the Law Commission's current review of insurance contract law, together with research assistant Saira Paruk.  It is available free online to all CII members and subscribers to CII Information Services. For further information go to www.cii.co.uk/is/ombudsman.