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Insurance and criminal convictions
For a former offender, access to insurance is fundamental to establishing a law-abiding life. Having decided to leave crime behind it enables them to secure accommodation, employment (or self-employment) and protect their financial situation. Once a person has been successful in changing their life they may rarely give thought to past mistakes, particularly minor ones. They use insurance the same way as everyone else - without giving it much thought. However, the insurance industry's current practices towards people with convictions means that the 8 million people on the Government's Offender Index database would be well advised to check their policies are actually valid.
Legal Principles
Under the contract law duty of uberrima fides (utmost good faith) the onus is on the proposer or policyholder to disclose material facts 'that would have an effect on the mind of the prudent insurer in assessing the risk' even if they would not necessarily 'have a decisive effect on the insurer's acceptance of the risk or on the amount of premium charged'. Under the Marine Insurance Act 1906 an insurer may avoid a contract for any misrepresentation of a material fact, even if the misrepresentation was made honestly and without any lack of care. Innocence is no defence.
The Rehabilitation of Offenders Act 1974 (ROA) aims to prevent a person being penalised indefinitely following a conviction. It sets a time period, based on the sentence given, during which convictions must be declared to relevant parties such as employers and insurers. It states that once this period has passed, "failure to disclose a spent conviction shall not be a proper ground for prejudicing in any way in any occupation or employment." Until this period passes, the conviction is defined as unspent. Once the period is over, the conviction is spent. As it relates to insurance, "The broad effect of the Act... is to relieve any proposer for insurance of the obligations to disclose a conviction or even the fact that he had committed the crime." The ROA limits uberrima fiddes because after the specified time the offence cannot be considered in any assessment and does not need to be declared. Customers should therefore disclose unspent convictions, but not spent ones.
Insurance Practice
The response of major home insurers to the disclosure of any unspent conviction is to cancel (or refuse to provide) cover without any further assessment. A Magistrate's fine is treated in the same way as murder or serious fraud. Motor insurers regularly refuse to offer cover on the basis of non-motoring convictions.
Under the ROA, convictions remain unspent for long periods of time. Those resulting in fines and community sentences must be disclosed for five years. Prison sentences of less than 6 months have a seven year period and those up to 30 months must be disclosed for a decade. As a result of sentence inflation, an increasing number of custodial sentences over 30 months mean over 100,000 people must always disclose . Furthermore, this issue does not only affect the person who has the conviction. The presence of anyone with an unspent conviction in the household is treated as a material fact.
The issue has been compounded in recent years by the exponential growth of insurance comparison websites. This mass market model has seen many people fall foul of 'assumptions' that are made of each customer to simplify the purchasing process. At the same time the percentage value of claims actually paid out has dropped significantly. Awareness of contract law and the ROA amongst sales-focused call centre staff is very low and can lead to similar problems. Consumer knowledge is equally low and therefore staff advice is taken as law. Criminal justice organisations and legal advisors also consistently fail to provide advice on this issue to their clients.
Consequences
If you can't get insurance at all, the consequences are obvious. If you can't get it at an affordable rate, things may be just as bad. However, matters can reach their very worst when people who incorrectly believe they are insured need to make a claim. A BBC documentary recently exposed the case of Michelle Barber who is being taken to court for £240,000 by her insurers. Aviva had paid out after Ms Barber was the victim of an arson attack on her home but she had failed to disclose a small Magistrate's fine which she had picked up four years before taking out her policy. The reality is that there may be millions of households in the UK with policies that could be voided in the result of a claim.
Specialist Brokers
Over the last ten years the situation has improved significantly. The charity UNLOCK (the National Association of Reformed Offenders) negotiated the establishment of a specialist broker service for people with unspent convictions in 2000. Since then it has encouraged others to enter in to the market and its website www.unlock.org.uk now provides information via a free download on seventeen brokers that can insure reformed offenders. UNLOCK is also working with the Association of British Insurers on new industry guidance for insurers and comparison websites on how they treat customers with convictions.
For those facing problems with claims, it is important to note that the legal principle of utmost good faith works both ways and the duty of full disclosure also applies equally to the underwriter. The stated practice of the Financial Ombudsman is that insurers may not avoid a consumer policy for non-disclosure where no question has been asked but this is not in line with the law. A draft Bill recently presented by the Law Commission would, "replace a consumer's duty to volunteer information [that would have an effect on the mind of a prudent insurer] with a requirement to answer questions carefully and honestly" bringing the law in line with FOS practice.
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