Did you know?
A new legal framework that redefines a customer’s duty of disclosure for every business insurance policy comes into effect on 12th August 2016.
The act modernises Insurance law with the aim of making recovery from Insurers simpler and fairer where claims arise. The duty of disclosure now requires fair presentation of risk.
The act also changes the application of warranties and how certain other terms operate.
Why does this matter?
Until now, the law has been based on the Marine Insurance Act 1906, which states “the proposer of the insurer has a duty to disclose all material facts relevant to the acceptance and rating of the risk. Failure to do so is known as non-disclosure or concealment and renders the insurance voidable by the insurer”
The new act requires “clear and accessible” presentation of risk information and places an obligation on the customer to make reasonable enquiries within the business. This should include knowledge of senior management and those involved with the purchase of Insurance. Any unusual activities or known areas of concern must be highlighted.
Where a “fair presentation” has not been made, insurers now have more options available to them than policy avoidance. The response will vary depending on whether the failure was deliberate and/or reckless. Where the breach was not deliberate or reckless, a proportionate remedy will apply.
What should I do?
- Establish a clear understanding of the risks to be Insured
- Define management involved with the purchase of Insurance and record the information gathering process
- Start the process early to ensure clear presentation of information and checks
- Your Broker should work closely with you and gain a full understanding of the risks to be Insured and assist you in providing a “fair presentation of risk” to the Insurer
This is intended to be a brief summary of the Insurance Act 2015, and should not be considered as advice in any specific situation. For further information, please contact Kidd Insurance Services.