The Insurance Utmost Good Faith Principle: The Case of Malta
Simon Grima, Andre Farrugia
Amidst a world of change and development, the insurance industry is accustomed to adapting its products, services and practices to suit the needs of the customer. One practice which is in the limelight where insurance business is concerned is the disclosure of material facts truthfully, accurately and positively, given the asymmetric nature of an insurance contract.
After several years of public outcry and disputes, the UK went through several attempts by the industry to self-regulate until legislators took the plunge to reform the century old principle in the year 2012. However, Malta, although being a commonwealth country that has traditionally been reliant on UK practice, has not yet followed suit. The Consumer Insurance (Disclosure and Representations) Act 2012 insurance reform, could potentially affect the indigenous insurance practice to the extent that the position taken by the UK could trigger the need for Malta to reform. Moreover, being an EU member state, Malta finds itself at another crossroad having to endorse EU Directives and Regulations.
With this paper we therefore examine where Malta stands with respect to the duty of utmost good faith, which is a principle affecting the way insurers do business and how the respective claims will be treated by the courts. It also has an impact on the relationship with the customer and how the industry is being portrayed by the public on the perception scale.
Although a small country, Malta holds excellent relationships with its international counterparts and significant business is made with international corporates to secure local and foreign risks. The importance of having practices that are in sync with those carried out internationally is paramount to ensure Malta remains competitive in the area of insurance.
We herein also seek to establish a position of the state of affairs and shed light on whether Malta should reform this legislation, to follow the footsteps of the UK or wait for an EU initiative.
Experts in the technical and legal field were interviewed with a view of obtaining a limpid picture of the current situation and its corresponding shortcomings leading to the establishment of the benefits of reform, if at all. Any decision taken by Malta might have a ripple effect on similar small countries and could see Cyprus, Hong Kong and Singapore adopting similar changes.
Findings highlight that Malta is not insular and always has to network with other foreign market players to diversify and cross sell its services. To retain competitiveness and relevance in the international business, it is recommended that Malta changes its practices in line with changes in trends especially the ones dictated by the consumer. Most did admit that UK remains the Island’s greatest influencers and it is only a matter of time before the Maltese practice will mimic these changes in the British practices. However, experts note that Brexit adds complications, since any EU directive or regulation can have an overriding effect on UK practices.