Michelle Boardman

Abstract

Insurance companies rely heavily on actuarial data—facts about past risks—in developing products and navigating regulatory approval. Given the centrality of such data to drafting, pricing, and legitimizing insurance policies, it is striking that courts, insurers, and policyholders largely ignore it when interpreting policies in litigation. This article explores how actuarial data could be used and considers informal explanations for why it is not invoked more often. It identifies three ways actuarial data could improve interpretation and construction. First, actuarial data can help prove or disprove insurer good faith: comparing premiums collected with risks covered can confirm or refute suspicions of bait-and-switch practices. Second, actuarial data can substantiate an insurer’s claimed actuarial purpose, providing contextual clarity that resolves ambiguities—crucial because a finding of ambiguity almost always favors the policyholder. Third, actuarial data can reveal insurer intent, offering insight beyond merely showing the absence of bad faith and generating benefits for both insurers and consumers. The article argues that courts in insurance cases often engage in a task that is both more and less than interpretation—they effectively regulate insurance policies by determining which clauses may be enforced. Actuarial function gives courts intent on regulating the insurance field a clearer view of the policy implications of their rulings, enabling them to consider the interests of policyholders beyond the litigant immediately before them.

John Lowry

Abstract

This article explores the current state of United Kingdom law concerning the duty of good faith in insurance contracts. Recent case law shows that the insured’s duty of disclosure continues to evolve, and the article argues that, given the fragmented nature of the current law, future reform should focus on creating a consistent regime for insurance contracts—one flexible enough to encompass both consumer and commercial insurance while maintaining clear and certain objectives. The first part examines the insured’s duty of disclosure as originally articulated by Lord Mansfield CJ. The second part analyzes post–Carter v. Boehm case law, which developed the notion of good faith and expanded it into a duty of utmost good faith. The third part explores the discomfort of UK courts and law reform agencies regarding the severity of the insured’s duty and the injustices that result when insurers avoid policies for nondisclosure. The fourth part assesses recent judicial efforts to alleviate the harshness of the existing regime. The concluding section briefly reviews the 2009 Consumer Insurance (Disclosure and Representations) Bill, published by the English and Scottish Law Commissions, and proposes an alternative model informed by developments in Australian law. The article argues that reform should focus on balancing the economic costs of change with the benefits of a more equitable system that does not artificially distinguish between consumer and business insureds.

Michael W. Taylor

Abstract

This article explores the fragmented regulatory structure of U.S. financial markets in light of the recent financial crisis and examines two regulatory reform approaches originating in the United Kingdom. The first approach calls for the creation of a unified regulatory agency responsible for overseeing all major segments of the financial services industry. The second, known as the “Twin Peaks” model, proposes dividing regulatory authority between two agencies: one dedicated to overseeing the safety and soundness of financial firms, and the other focused on regulating their sales practices. The article describes the debate in the UK that preceded the establishment of the unified Financial Services Authority (FSA), explores the justifications for such a single regulator, and discusses the UK’s rejection of the Twin Peaks approach. It then examines the debate surrounding the role of a central bank, such as the Bank of England, in financial oversight. The article reviews U.S. regulatory reform efforts in light of the British experience with unified regulation and concludes that some variation of the Twin Peaks model would likely be more successful in the United States than a single-regulator approach.

M. Todd Henderson

Abstract

This article explores whether credit derivatives should be regulated as insurance and proposes an alternative regulatory approach for these financial instruments. The largely unregulated credit derivatives market has been cited as a contributing factor to the recent housing market collapse and resulting credit crunch. The article examines the possibility of regulating credit derivatives as insurance but concludes that, although some credit derivatives allow banks and other debt providers to share risk with investors, this characteristic alone is insufficient to classify such contracts as “insurance.” It argues that insurance regulation is not suitable for the credit derivatives market, while acknowledging that some form of regulation is necessary. The first section provides an overview of the basics of credit derivatives; the second presents arguments supporting insurance-style regulation; the third explains why credit derivatives, despite facilitating risk sharing or transfer, fall outside the scope of insurance law; and the final section outlines what an appropriate regulatory framework for credit derivatives might look like and contrasts it with traditional insurance regulation.

Melissa Wong

Alana Bartley

Caroline Vazquez

Timothy Alborn

Geoffrey Clark

Sharon Murphy