INSURANCE LEGISLATION HAS CHANGED!
On August 12th 2016 the new Insurance Act 2015 came in to effect.
What is The Insurance Act 2015?
A new legal framework affecting every business insurance policy placed renewed or amended after August 12th 2016. It represents a subtle change to the basis on which insurance policies are founded.
Why a New Act?
The Act is intended to modernise the current insurance law and aims to simplify and make fairer the process of dealing with Insurers in the event of a claim. Previously Insurers were able to avoid an entire policy if there had been a non-disclosure of material information. The new Act Introduces proportionate remedies and is a balance between providing the legal basis for a fairer claims outcome, in return for a fairer presentation of risk.
What does this mean for you?
The key aspect from your point of view is the accuracy of the information you must provide. A new duty of “fair representation” is being introduced replacing the general obligation to disclose all material facts i.e. this means it is imperative you provide us with as clear, correct and up to date information as is possible.
What counts as fair?
The Act sets out what you must do in order for the information you provide to count as fair. Based on your business circumstances and for the avoidance of doubt you will need to show:
You must make adequate/reasonable enquiries within your business and amongst any relevant third parties (e.g.external contractors) to identify and verify information relevant to the risk concerned. You must also include all relevant knowledge of your “senior management” and insurance advisers
The information you supply should be easily understood, notable points should be drawn to underwriter’s attention including highlighting unusual activities and/or known areas of concern that could influence an underwriter’s decision. Any intentional withholding by you of material information will be considered a breach of the duty of fair representation.
Is there any information I do not need to disclose?
It is not necessary to disclose information already held by underwriters, provide knowledge a competent underwriter might be expected to know already or supply information which is regarded as “Common Knowledge”.
How does this affect me?
You are now under a stronger duty to disclose every material circumstance that you know or ought to know about or provide sufficient information to put a prudent underwriter on notice that further enquiries may need to be made to reveal all the circumstances. In practice most relevant information is already collected as a matter of course however for your own protection and to comply with the new Act we may find it necessary to ask you a few more questions or ask you to complete a form either at renewal, at the start of new contracts or when a change occurs. You may also notice some changes to your future policy wordings.
How does this affect your Insurer?
Your Insurer must now show that he would have acted differently if you had made a fair presentation:
The new Act aims to make seeking payment from Insurers simpler and fairer in the event of a claim, provided you can show you have made every effort to present your risk fairly.
What should I do now?
Nothing, but at renewal or if a significant change is made to your policy after August 12th 2016 you will need to ensure you satisfy the new law and that adequate and effective corporate governance and communications are in place where necessary. For example you may need to ensure a reasonable search is undertaken to reveal material information and that this is communicated and documented in a manner that is reasonable, clear and accessible. Data dumping would not be considered fair and unusual activities and/or known areas of concern must be brought to Insurers attention.
If you have any questions about the changes please speak to your usual Brookfield Donovan contact as soon as possible.