|Insurance Act 2015 01-08-2016
The Insurance Act 2015
As you are aware the Insurance Act changes are coming into effect 12 August 2016. The Act will replace certain provisions of the Marine Insurance Act 1906. The changes are designed to provide a more up-to-date framework for commercial insurance in the UK, with a focus on fairness, transparency and certainty over the rules that govern contracts.
The Act makes important changes to the law, the key elements 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. The insured must disclose “every material circumstance which the insured knows or ought to know”. This is now qualified where the insured (or its broker) gives the insurer “sufficient information to put a prudent insurer on notice that it needs to make further enquiries”.
- Remedies for Non-Disclosure or Misrepresentation - Remedies must now be proportionate and reflect the actual underwriting impact, had the correct information been provided originally.
- Basis of Contract Clauses – Are abolished removing mechanisms which allow avoidance if risk information provided is inaccurate.
- Remedy for Breach of Warranty – Warranties can continue to be applied, but breach will now mean liability is only 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. 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.
What does this mean for you and Vasek?
Vasek believes the new law represents best practice already followed. We already work towards many philosophies of the new Act and have always tried to work with you to achieve fair presentation of any risk. Our underwriters always endeavour to build a customer profile to allow a full understanding of the risk being placed with us.
The Act stipulates that an insurer may not rely on the insured’s breach of a term to avoid paying a claim if the breach could not have increased the risk of loss. This has long been Vasek’s approach in the event of a claim, where fair presentation has not been made, we will continue to adopt a fair, pragmatic and transparent approach.
The Insurance Act is not just about changes we make, brokers will need to adapt to the Act and the ways in which all insurers do business going forward. Vasek will keep you updated with any changes made to policy wordings or question sets in the future. For now we are continuing with our current question sets and ask you to encourage active rather than passive engagement in making a ‘fair presentation’ and continue giving as much detailed information as you can so we can fully understand the risk to be insured. We will ask for further information should we need it.
Updated laws will undoubtedly bring change to the market, we hope they will be mostly positive for all consumers. Please contact us should you have any questions and we will be happy to discuss with you. Vasek will work with you to promote open communications as we both continue to adapt to our changing industry and continue our working partnership.