All car insurance policies include a cancellation clause outlying the cancellation rights of both parties to the contract. For example:-
The Company may cancel this policy by sending seven days’ notice by registered letter to the insured at his last known address (and in the case of Northern Ireland to the Ministry of Home Affairs Northern Ireland) and in such event will return to the insured the premium less the pro rata portion thereof for the period the policy has been in force.
This condition gives the Car Insurers the right to terminate at relatively short notice their liability to indemnify the insured.
The condition is not exercised lightly because there is always the risk of bad publicity for the insurers, particularly in this age of consumer awareness and emphasis upon consumer relations.
The Car Insurers might decide to terminate their policy if the experience thereunto has been consistently bad and shows no sign of improving – for example, if the insured has been involved in a series of accidents and there seems to be every chance that he will be involved in another, with potentially serious consequences for his insurers.
Even then, the instances of cancellation solely on the grounds of adverse experience tend to be few and far between and cancellation is not common unless facts which have emerged since the completion of the proposal suggest that the risk is totally different from that which it was expected to be or that the insured has been guilty of a breach of utmost good faith.
In these circumstances a proof essential in a court of law to avoid liability may not be forthcoming, and, unless a claim has already been made it may be convenient to terminate the policy without cause specified.
The cancellation is mot effective for the purpose of the Road Traffic Act unless the certificate (or a statutory declaration in lieu) is received by the insurer within seven days of the date of cancellation (see s.147 (4) of the Road Traffic Act 1972).