The UK Treasury has announced reforms to modernise commercial insurance laws and reduce legal disputes over business claims.

The reforms are contained in the Insurance Bill, which had its first reading in the House of Lords on Thursday, and are intended to update 100-year-old rules governing contracts between businesses and insurers.

The bill covers disclosure and misrepresentation in business and other non-consumer insurance contracts, warranties and insurers’ remedies for fraudulent claims.

Introducing a duty of “fair representation” on commercial policyholders, the bill stops short of recommended reforms to allow claimants to pursue insurers for damages in the case of delayed settlement. Media reports suggest these were removed after objections from insurers.

According to the Treasury, the legal regime will be modernised by the bill to benefit insurers and their business customers by “increasing transparency and certainty over the rules that govern contracts between them and reducing the number of legal disputes over time”.

Treasury informally consulted last month on the bill, which is the product of recommendations made by the Law Commission and the Scottish Law Commission, following eight years of consultation with businesses and insurers.

Andrea Leadsom, Economic Secretary to the Treasury, says the UK insurance industry is “a major success story”, employing more than 300,000 people. She says insurance contract law “needs to be brought into the 21st century to deliver better services to customers”.

“This will mean that British insurers are better equipped to compete against their global competitors, some of whom have already introduced more modern legal regimes for insurance, while businesses are expected to benefit by around £100 million ($182 million) over the next 10 years, as a result of factors such as lower litigation and transaction costs.”