Failure to provide contract certainty costs the general insurance industry more than £500m each year, according to Lloyd’s of London.
Nick Prettejohn, chief executive of Lloyd’s of London, said the market spends £500m or more paying external legal advisers each year as part of the claims process because a contract on insurance documentation had not been provided.
He said contract certainty was achieved by the complete and final agreement of all terms between the insured and insurers before inception. Currently, contract certainty is a commercial necessity rather than a regulatory concept.
He added it was for this reason the Financial Services Authority might investigate the internal actions of companies to implement new measures to prove contract certainty.
Jim Clancy, financial planner at Clancy’s financial planning, said: “Definitions are all important in the contract. An independent financial adviser is not a doctor and not qualified to pass judgement on what the definition of a critical illness may be.”
Scott Farley, PR manager of the International Underwriting Association (IUA), said: “Sometimes it takes months for a cover letter to come through, giving rise to the potential for a legal dispute.”
The IUA has drawn up a proposal for companies to voluntarily submit slips to a quality control audit process.
