The Reform of Insurance Warranties: A Behavioural Economics Perspective

摘要

Lawyers, when off duty, recognise that the way in which choices are presented matter to the decisions that people make. A critical leader piece (whether in The Guardian or The Telegraph) on the framing of the question to decide Scottish independence would fit comfortably with this world view, and be considered unremarkable. However, suggest that the manner in which a commercial law statute is presented would have a similar effect on their drafting of a contract, and brows would furl. However, contracting behaviour in key insurance markets cannot be explained by reference to our standard model of economic rationality. This piece applies the behavioural economics of Nudge to the default rule for breach of insurance warranty, and in particular to the attempts to mitigate the strict default by means of the "held covered" clause. What emerges is substantial evidence of behavioural influence on contracting and a call for a non-directive statutory design.