Parliament is currently considering various amendments to the new Consumer Rights Bill, with the the Department for Business, Innovation and Skills (“BIS”) intending for the Bill to be implemented by 1 October 2015.
The Bill is intended to reform and consolidate UK consumer law, which the BIS describes as “out of date, confusing and incomplete”. Reforms will affect the laws relating to the supply of goods, the supply of services, unfair contract terms, defective digital content and enforcement powers.
The UK Government intends for Bill to protect the following “Core Consumer Rights”:
- Right to clear and honest information before they buy;
- Right to get what they pay for;
- Right that goods and digital content are fit for purpose and services are provided with reasonable care and skill.; and
- Right that faults in what they buy will be put right free of charge, or a refund or replacement provided.
There are various proposed reforms which will have significant implications for insurers including:
- The effect of pre-contractual information
The Bill contains an additional consumer right, requiring that services provided to consumers must comply with information provided to the consumer about that service in the pre-contract stage (taken in context), if the consumer relied on that information. In the insurance context, this will mean that certain pre-contractual information will be treated in the same manner as if it had appeared as a term in the policy itself
Insurers (and other financial service providers) will need to ensure that information provided to customers in the pre-contract stage, to ensure that they comply with any additional obligations which that information might create;
- Changes to unfair terms legislation
The Bill creates an exception to the normal requirement that consumer contract terms be fair. Under the Bill, a term of a consumer contract may not be assessed for fairness to the extent that a) it specifies the main subject matter of the contract, or b) the assessment is of the appropriateness of the price payable under the contract by comparison with the goods, digital content or services supplied under it.
The exception may only be relied on if the term or clause in question is “transparent and prominent”, meaning that it is expressed in plain and intelligible language (transparent) and brought to the consumer’s attention in such a way that an average consumer would be aware of the term (prominent);
- Introduction of new statutory remedies
The Bill introduces two “layers” of remedies for breach of consumer rights – a) the right to have services re-performed; or b) the right to a reduction in price. Given the nature of insurance and other financial services contracts, re-performance will probably not be feasible, and consumer remedies will most likely be in the form of price reductions. These new remedies do not prejudice a consumer’s rights to seek traditional remedies including damages, specific performances and a right to treat the contract as terminated.
The Bill is likely to herald significant changes to the regulatory framework for insurers and financial service providers. Insurers will need to consider what steps are needed to ensure their activities comply with the new provisions, once the Bill’s formal implementation date is known.
Further information on the Bill and the implications for insurers will be published here as the Bill moves towards Royal Assent.