The Insurance Act 2015 The new Act comes into force on 12th August 2016 comprising of a new legal framework affecting every commercial insurance policy incepted, adjusted or renewed after this date. The aim of the revision is to modernise the law governing insurance to create a fairer system for policyholders whilst bringing about a simpler landscape, the main crux being the duty of the customer to provide a ‘fair presentation’ of the risk. A summary of the implications of the new rules can be found here: http://www.legislation.gov.uk/ukpga/2015/4/notes/division/4
With this in mind we have put together a few Q&A’s for our customers.
The Act makes five important changes to the law. The main areas being:
Duty of Disclosure & Representation – The existing duty remains and is clarified with the requirement for businesses to make a ‘fair presentation’ of their risk to insurers. (Further information below)
Remedies for Non-deliberate Non-Disclosure or Misrepresentation - Remedies must now be proportionate and reflect what the insurer would have done if the correct information been provided originally.
Basis of Contract Clauses – These clauses are now removed which previously allowed Insurers to avoid a policy if risk information provided was not accurate.
Remedy for Breach of Warranty – Warranties can still be applied to policies by insurers, but any breaches of warranties will result in liability being suspended for the period of the breach and only where relevant to a claim.
Remedy for Fraud – The new remedy removes the option of avoidance of the Insurer. In the event of fraud, an insurer remains ‘on cover’ for claims made before the fraud occurs but has the option to cancel the policy with effect from the date of the fraudulent act.
The existing duty of policyholders is simplified with the requirement for customers to make a ‘fair presentation of risk’ to insurers. You will need to be prepared to engage with your existing provider or approach new markets earlier than previously.
This is defined as “every circumstance which the insured knows or ought to know. However failing that, sufficient information should be provided to alert an insurer that they need to ask further questions”. If you are in doubt then you should disclose to us. The presentation you provide must be clear and accessible, any ‘data dumping’ of large amounts of information without signposting is not allowed. There is also an additional requirement to highlight any unusual activities and/or known areas of concern.
You must make satisfactory requirements within your business to identify the information relevant to the risks concerned which includes a consultation of all of your senior management team, which also includes your insurance broker. You should also ensure that you make reasonable enquiries to any third parties involved in the business such as contractors.
We aim to start our renewal and new business process earlier to ensure we have enough time to gather the relevant information and allow for additional questions and queries from Insurers to be answered. We also aim to help you in ensuring that you have made a fair presentation of your business risks and understand the implications of any non-compliance with warranties.