The Law Commission's proposals to introduce a non-contestability clause into life insurance and critical illness policies is likely to lead to a cross-subsidy in favour of "liars", warns Jon Briggs, protection research manager at Hargreaves Lansdown.
The Law Commission's suggestions would mean insurers could only turn down a claim on the grounds of non-fraudulent non-disclosure if they prove the non-disclosure within three years of the policy being taken out. Although this could lead to fewer declined claims and increased consumer confidence, Briggs warns it is likely to lead to a cross subsidy in favour of liars. He states: “With a non-contestability period of only two years, the experience in the USA is that people are tempted to select against the life company by taking a risk that they will not be ‘found out’. To put it bluntly,...
To continue reading this article...
Join Professional Adviser for free
- Unlimited access to real-time news, industry insights and market intelligence
- Stay ahead of the curve with spotlights on emerging trends and technologies
- Receive breaking news stories straight to your inbox in the daily newsletters
- Make smart business decisions with the latest developments in regulation, investing retirement and protection
- Members-only access to the editor’s weekly Friday commentary
- Be the first to hear about our events and awards programmes