Consumer insurance law requires immediate change, according to consumer groups, lawyers, brokers and most insurance firms responding to a consultation by the English and Scottish Law Commissions.

In the responses published this week, the Law Commissions' provisional proposals for change received widespread support. However, the Commissions, which exist to recommend law reform when it is needed, stressed that they have not yet formulated their final recommendations on consumer insurance law reform.

The Commissions argue that the current position on pre-contract information on consumer insurance has overlapping layers of law, regulation and ombudsman discretion, which they described as confusing, inaccessible and needlessly complex.

The consultation received more than 100 responses, which covered a range of issues including pre-contract disclosure of information, warranties and the role of the broker in both consumer and business insurance.

Under the proposals, consumers should no longer be under any obligation to volunteer information to insurers when applying for insurance. They would only be required to answer honestly and with reasonable care any questions asked.

It also proposed that instead of being entitled to avoid the contract altogether for an inaccurate or misleading statement, as under the current law, insurers would have a range of remedies depending on the degree of fault.

The proposals also aimed to bring the law more into line with current industry practice by severely restricting the occasions when insurers can avoid liability by relying on a consumer's breach of a warranty. Even in such cases, insurers would have to show the breach caused or contributed to the loss claimed under the policy.

Earlier this month, a Financial Services Authority found bad practice among a section of insurance comparison websites. In their review, the watchdog criticised insurance comparison websites that fail to offer fair and accurate information to their customers.

The regulator had also looked into whether consumers were encouraged to consider features other than price before buying a product. FSA was also concerned about the clarity of the levels of excess that apply to insurance policies. Insurance comparison websites were also investigated to find out whether adequate measures were taken to ensure proper listing on their sites of key product features within insurers’ policies.

However, support for the Law Commissions consumer proposals was received from consumer groups, brokers, lawyers and insurers themselves. Of the 39 insurers and insurance organisations that responded, only four were opposed to reform.

In a joint statement, the Law Commissions said, “We are encouraged by the widespread support for reform, particularly from the insurance industry.”

“The great majority of consultees agreed that there is an urgent need for clear, accessible legislation on consumers’ duties to provide pre-contract information and insurers' remedies where information is not provided.”

The Commissions will now focus on the preparation of a final report and draft bill on pre-contract information in consumer insurance, to be published in the summer of 2009. It has been suggested that the law on warranties will be dealt with later, alongside any forthcoming business insurance law reforms.

It was further agreed that proposals aimed at clarifying the role of the broker would also be revisited. The Commissions had hoped to clarify the law on whether a broker or intermediary acts as agent of the insurer or the insured when he receives pre-contract information. The issue is important because it determines who bears the risk of the broker getting it wrong.

According to the Commissions, it was agreed that a suggestion be put forward to the effect that the broker be treated as acting for the insurer unless clearly independent and acting on the insured's behalf. However, because the proposals generated mixed reactions, particularly what is meant by "independent". The Commissions say that the issue will be looked into again.

A summary of responses to the proposals for business insurance will be published shortly. Further Issues Papers on post-contractual duties of good faith and on whether insurers should be liable to pay damages for the late payment of claims are planned for this autumn.