UK Law and Practice Contributed by: Clare Swirski, E. Drew Dutton, Hugo Laing and Rosamund Wood, Debevoise & Plimpton LLP
insurance broker must also ensure it explains to its cli- ent the terms of the proposed insurance to ensure the client is fully informed and satisfied that all its insur- ance requirements are met. An intermediary acting on behalf of an insurer must comply with the conduct of business requirements applicable to the selling of insurance. 6.4 Legal Requirements and Distinguishing Features of an Insurance Contract At common law, there is no requirement for a contract of insurance to be in any particular form (including in writing), although there is usually a document (called a policy) that evidences the contract. Some insurance contracts, such as contracts for marine insurance, are required by statute to be expressed in a policy. Insurable Interest The Marine Insurance Act 1906 and the Life Assur- ance Act 1774 (not restricted to life insurance) require an insured person to have an insurable interest in the subject matter of the insurance. Thus, for an insur- ance contract to be valid, the person taking out the insurance should stand to benefit from the preserva- tion of the subject matter of the insurance or suffer a disadvantage should it be lost. The law on insurable interest differs depending on whether the contract is for non-indemnity insurance (insurance that pays out a lump sum on the occur- rence of a specified event, such as death, personal accident or critical illness, regardless of the loss suf- fered) or indemnity insurance (which compensates the policyholder for loss suffered). In the case of non- indemnity insurance, the Life Assurance Act 1774 makes null and void any policy on the life or lives of any person(s) or on any event made by any person having no interest. The English and Scottish Law Commissions have consulted on the topic of insurable interest at various times over the past ten years. The Law Commissions have suggested that the law of insurable interest is complex and uncertain and not required at all in rela- tion to indemnity insurance. In 2016, the Law Com- missions conducted a short consultation on a draft bill to reform the law on insurable interest and pub- lished an updated draft bill on 20 June 2018. At the
time of writing, the Law Commissions were analysing responses to the consultation on the updated draft bill and indicated that they will produce a report with final recommendations in due course. 6.5 Multiple Insured or Potential Beneficiaries Generally, an insurable interest is required for multiple insureds and beneficiaries who are not named in the contract; mortgagees, for example, do have an inter- est in the relevant policy through their loan secured on the relevant property. For life policies, the position is less straightforward – where there are “mid-term beneficiaries” in multi-life policies, the requirement for an insurable interest at the time the policy is taken out means, theoretically, the policyholder lacks an insurable interest in respect of those potential ben- eficiaries. The Law Commissions’ draft bill (see 6.4 Legal Requirements and Distinguishing Features of an Insurance Contract ) contains wording intended to clarify the position in favour of such potential benefi- ciaries. 6.6 Consumer Contracts or Reinsurance Contracts Consumer contracts tend to have more protection for the insured through regulation. CIDRA 2012 provides clarity to consumers on what information they need to provide to insurers when taking out an insurance policy. It removes the duty on consumers when buy- ing or renewing insurance to volunteer information, replacing it with a duty to take reasonable care not to make a misrepresentation. Generally, representations will be made by consumers in response to questions raised by the insurer. In relation to consumer contracts, CIDRA 2012 also requires the insurer’s remedies to be proportionate to the failings of the insured. This means that an insured is not unfairly deprived of all cover in circumstances where an insurer would still have accepted the risk had it known the full facts. 7. Alternative Risk Transfer (ART) 7.1 ART Transactions The term “alternative risk transfer” (ART) encompass- es several alternative techniques used to transfer risk
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