As a result of the Insurance Act 2015, major changes have been made law in relation to Non-consumer Insurance Contracts. Whilst this new Act didn't come in force until 12th August 2016, some Insurers adopted the reforms with immediate effect.
This had a significant impact on the operation of your insurance policy, including your disclosure obligations towards insurers, warranties and fraud.
The Insurance Act imposes an obligation on all policyholders to make a “fair presentation of the risk” prior to your Policy commencing.
This is one that discloses, in a manner that is reasonably clear and accessible, every material circumstance which is known or ought to be known by the Policyholder’s senior management, or those responsible for arranging insurance, following a reasonable search.
This is anything which would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms. There is no specific limitation on what constitutes a material circumstance but examples include prior claims, your financial history, convictions of key personnel and your business activities.
To disclose material circumstances that you actually know but also those you ought to know. If the information is readily available to you but you do not disclose it due to a lack of enquiry or “turning a blind eye” you will have breached your duty to fairly present the risk. Any knowledge we have as your broker must also be presented to Insurers.
For the purposes of the Act (but is not limited to) – Senior Management includes anyone who has a key role in making decisions on behalf of the business, even if they do not sit on the board or if they do not officially have a management role. You should take the time to carefully identify who within your business is best placed to identify any information that may be relevant to insurers when considering the particular risk and type of policy.
You are obliged to undertake a reasonable search. When considering the extent of your search you should take into account the nature of the insurance you wish to purchase and consider who within your organisation is best placed to provide relevant information.
All information must be provided to insurers in a clear and accessible manner. This means that information must not be provided in an ambiguous way. The new rules prevent Policyholders from concealing key facts amongst large volumes of less relevant or immaterial information.
Insurers do have differing remedies depending upon the nature of the breach and what would have happened had you fairly presented the risk:
Overall the impact will be beneficial to policyholders, as they will benefit from greater clarity in understanding the laws that govern insurance contracts. Furthermore the sanctions available to insurers will be more proportionate.
Historically in the event of a fraudulent claim being made against the policy, all cover under the policy ceased and insurers were entitled to retain the premium. The policyholder would also have to repay any claims payments already made. However, under the new regime, insurers will be entitled to terminate the policy from the date of the fraudulent claim or act, but must still cover claims arising from incidents occurring before the fraudulent act
For further information or a confidential review of your insurances, please contact: