The New Consumer Rights Act: The Insurance Point Of View

The Consumer Rights Act 2015 received Royal Assent in March 2015 and much of it is set to be introduced as law on 1 October.

The new Act replaces a number of laws concerning business to consumer transactions, such as the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982. It is very much aimed at making things much clearer for consumers when it comes to understanding their rights and the solutions they are able to call upon should something go wrong during a transaction.

Naturally our interest has turned to how the Act will work from an insurance point of view and how our consumer clients will be affected by the new legislation.

Having worked through the key changes brought about by the Act, we have identified three main areas in which we can relate the new laws to insurance:

  1. Digital content
  2. Substandard service
  3. Unfair or hidden terms and conditions

Digital Content

Previously covered by UK consumer law on goods and services, digital content and digital content contracts now get their own category and set of rules.

Digital content refers to things like music or video downloads, apps, computer games, software and the like. Under the Act, all digital content must be supplied to a satisfactory standard, fit for purpose and as described, the same as all goods and services. There is also reference to streamed content which must be streamed within and for a reasonable amount of time, unless a contract states otherwise.

Insurance example: If you are provided with a smart driving app alongside a motor insurance policy in order to enjoy discounted premiums by demonstrating safe driving, then the insurer will have a responsibility to ensure the app is fit for purpose and that access to it is continuous. If the app becomes inaccessible for a significant period of time then you will have a right to a price reduction. Additionally, if the app causes damage to your mobile device, you will have a right to an appropriate remedy.

Substandard Service

As a consumer, if you receive a service at an unsatisfactory level, then under the Act you will have a right to a ‘repeat performance’ that does match up with the contract. If you are unable to reach an agreement with the supplier, then you will have a right to a price reduction.

Service providers are required to exercise reasonable skill and care for a reasonable price. The service must be completed within a fair timescale and must be in-keeping with other applicable laws.

Insurance example: As financial service laws and insurance regulations already provide a high level of consumer protection, it is unlikely we will see many instances of the Consumer Rights Act applying to consumer insurance policies in this respect. However, in some cases where the Act may provide a higher level of protection than what is currently in place, then it could be applied. An example would be where a service must be completed within a reasonable timescale. Currently this is covered by a piece of regulatory legislation known as the Insurance Conduct of Business Rules which simply states that claims should be paid ‘promptly’. It could be that the Consumer Rights Act will provide consumers with a clearer path to claiming remedy for a delayed payout.

Unfair or Hidden Terms & Conditions

Existing legislation surrounding terms and conditions has been labelled conflicting. Now with the introduction of the new Act, as a consumer you will be able to challenge any terms and conditions that appear to be unfair or hidden within the small print of a contract.

Any supplier of goods or services to a consumer is required to ensure that all written terms of a consumer contract or notice (e.g. a renewal notice or customer promotion) are fully transparent. Unfair terms will not be binding, but consumers are still within their rights to rely on a term if they wish to do so.

Insurance example: Currently, in insurance contracts, core terms such as exclusions cannot be assessed for fairness, and this will remain unchanged with the Act. However, if a term is not deemed transparent or prominent, then under the Act it can be assessed for unfairness. Transparent terms are expressed in plain language and prominent terms are brought to the consumer’s attention in such a way that they cannot fail to be aware of them. If as a consumer you consider exclusions in your insurance contract to have lacked transparency or if you feel they were not communicated in a prominent fashion, then you will be able to raise a challenge.

What else do you need to know about the Consumer Rights Act?

The Consumer Rights Act 2015 also changes the window for returning faulty goods to 30 days, and the provider of the goods is required to repair or replace them within a reasonable amount of time, covering all costs to do so and without causing any significant inconvenience to the consumer. If goods are repaired then fail again, or are replaced with further faulty goods, then compensation can be claimed.

There is also a provision in the Act stating that anything mentioned to a consumer during the course of the sales process will become a term of the contract if the consumer relies on it to aid their decision making process.

Here at Robert Gerrard we believe that the insurance industry, via the FCA and the new Insurance Act that comes into force in August 2016 bringing with it numerous benefits for insured parties, provides consumers with a reasonable level of security and rights, and the new Consumer Rights Act can only add to this.

We will of course be keeping a close eye on how the Consumer Rights Act 2015 pans out in insurance terms, and will keep you informed of anything we feel you should know.