The Insurance Act 2015

The Insurance Act 2015 came into place on the 12th August 2016, and ten days in, some of our clients are still seeking clarity on the subject.  The Act introduces a number of reforms to the law that governs non-consumer insurance contracts.

It has been termed the most significant change in insurance contract law since the Marine Act 1906, with the aim of creating a fairer balance between the policyholder and insurer to reflect the evolution of the insurance market.  The Act will not apply retrospectively, so will only cover contracts entered into on or after 12th August 2016.

How will it affect you?

The Act still places an emphasis on ‘good faith’, but there is now a duty to make a fair presentation of the risk, to insurers, by disclosing every material circumstance that an insured knows or is expected  to know, plus sufficient information to put a prudent insurer on notice that it needs to make further enquiries to reveal those material circumstances.  All information from the insured  must be sourced by a reasonable search, which may include assistance from employees/managers/directors/sub contractors/insurance brokers.

The consequences of misrepresentation

Misrepresentation can occur unknowingly or be based on an honest mistake, for which the Act provides the following remedies:

If the insurer can prove that it would not have written the policy at all, it can avoid  the policy but must return the premiums paid.

If the insurer would have accepted the risk but on different terms, the contract is to be treated as if it included those terms.

If the insurer would have entered into the contract but charged a higher premium, the insurer may reduce proportionately the amount to be paid on a claim.

At a more serious level, reckless or deliberate misrepresentation of material circumstances could result in the policy being avoided  by the insurer, with no return premium.

Warranties & Terms

The Act will change the way in which the law deals with breaches of warranties and terms.  Previously, a breach of warranty could allow the insurer to avoid the policy, whereas now, cover is suspended for the period that the insured is in breach of that warranty.  In addition, if the warranty in breach bears no relevance to the loss in question, then the insurer cannot discharge liability due to non-compliance.  For example, if there is a warranty to install a fire alarm, and during the time when this work has not been completed, there is a break-in resulting in the theft of tools, the warranty is deemed irrelevant, as a fire alarm would not have deterred or prevented the theft.  This means the policy would still remain in force, despite the breach of warranty.

How can Caleb Roberts help?

Insurance is a technical matter, and the Act could cause confusion over what is required.   Fortunately, our team of experts can visit you to discuss any concerns, and highlight areas requiring further thought and attention.

We can then present your business proposals to our panel of insurers as a fair presentation of your risk.

Contact us to arrange an appointment in good time before your renewal date to take advantage of our personal service.