Lloyd's Market Association Bulletin

LMA14-022-NS | 10 June 2014


Use of LMA Model Wordings on 'Consumer' Business 

As Sean McGovern stated in his letter to CEOs regarding 'Conduct Risk - Lloyd’s Minimum Standards and Guidance' sent on 22 April 2014, the FCA continues to take a robust approach to supervision in the insurance sector, including the Lloyd’s market. One area of focus for the FCA is policy wordings and, in particular, the importance of insurers using wordings which are appropriate to their customer types.

In this context LMA members should be aware that the vast majority of LMA Model Wordings* have historically been drafted by LMA committees and panels specifically for use on commercial contracts.

In terms of 'Consumer' wordings, to date the LMA model Home Insurance Policy has been reviewed by the LMA and provided to the FCA for comment. Where other wordings (policies and clauses) have been developed by the LMA specifically for use on 'Consumer' business these have been identified by use of the term "For use on Consumer Insurance Contracts" within the wording title.

The LMA will be working with its membership to identify whether there are any other market sectors where the development of an LMA Model Consumer version of a wording would be beneficial. Alongside this work the LMA will work with Lloyd’s and ISO on developing the Lloyd’s Wordings Repository (LWR) so that any new wordings drafted for Consumer Business can be more easily identified.

The above work will take some time to complete. In the meantime managing agents should give careful consideration to ensuring that the wordings they use on contracts are appropriate for the likely end-customer type.

Neil Smith
Head of Underwriting
* Model wordings are purely illustrative and established and distributed for the guidance of Members, who are free to agree to different conditions.