Law Commission opens consultation on expanded definition of ‘insurable interest’

The Law Commission and the Scottish Law Commission have published an updated bill that proposes an expansion to the concept of insurable interest for life-related insurance. By using the term ‘life-related insurance’, the bill intends to create a wider category of insurance than just traditional life insurance, thereby also covering other forms of insurance which otherwise depend on human life or health, including personal accident, critical illness, disability insurance, investment-linked insurance products with a life insurance element and annuities.

The draft bill seeks to address existing ambiguities and narrowness of scope of the current law by expanding the definition of insurable interest for life-related insurance to:

  • provide that individuals have an automatic insurable interest in cohabitants, not just spouses or civil partners;
  • extend insurable interest to cover children and grandchildren, thereby enabling them to be lawfully covered under travel or critical illness policies;
  • confirm that pension trustees and other administrators of group schemes have an insurable interest in the lives of members of the group.

Responses are requested by 14 September 2018.

The Law Commission’s press release notes that then they last consulted on insurable interest, the responses indicated little demand for reform in relation to indemnity and non-life insurance.