Axing insurance law 'adds costs'
If a 100-year-old 'non-disclosure' law that enables insurers to avoid paying claims is axed they will pass the costs on to customers, according to the Law Commission.
It would mean that instead of consumers having to give certain information to insurers, the companies would be responsible for asking for the details that they need.
This would give them fewer grounds to reject otherwise valid claims because customers have unintentionally provided the wrong information, or withheld it altogether.
But a commission report says that the extra £4.4 million of life payouts, and between £5 million and £20 million for other policies, would be passed on.
It says: "This may be seen as a cost to insurers and a benefit to those consumer policyholders who receive a full or partial payment of their claims.
"But we anticipate that the cost of additional claims would be passed on to consumers. This would add around 0.08% to the cost of life and critical illness insurance and 0.025% to 0.1% to general insurance."
The commission has carried out an industry-wide consultation on changes, and believes that a new law is needed to clear up current confusion.