The Insurance Act 2015 represents the biggest change to UK insurance law in over a hundred years. It will affect many areas of commercial insurance and fundamentally alters the law on material facts and warranties. It is essential anyone working in insurance and related areas understands how the new legislation will apply. Unsurprisingly therefore, the Insurance Act 2015 is one of the hottest topics in the world of insurance training currently.
The Insurance Act 2015 represents the biggest change to UK insurance law in over a hundred years. It will affect many areas of commercial insurance and fundamentally alters the law on material facts and warranties. It is essential anyone working in insurance and related areas understands how the new legislation will apply. Unsurprisingly therefore, the Insurance Act 2015 is one of the hottest topics in the world of insurance training currently.
The provisions of the new Act come into effect on 12 August 2016 and will apply by default to all new policies after that date. In some respects a companion to the Consumer Insurance Act which came which came into force on 6th April 2013, the 2015 Act applies to all non-consumer (commercial) insurance policies.
Unsurprisingly therefore, the Insurance Act 2015 is one of the hottest topics in the world of insurance training currently.
In this article we look at how the Act affects commercial insurance policyholders. Under a new ‘duty of fair presentation’, policyholders are now required to disclose all ‘material circumstances’ of which their senior managers are or should be aware and to alert insurers to anything else they may need to follow up on. Policyholders must also provide information in a manner that is ‘reasonably accessible to insurers’, rather than simply bombarding them with masses of raw data.
If policyholders deliberately or recklessly breach their duty of fair presentation, insurers may treat a contract as if it had never existed, decline any claims, and retain any premiums. If any breach is unintentional, insurers must treat claims on the basis they would have if the relevant information had been provided. This would typically mean a proportionately reduced pay-out. Previously insurers might have declined all claims – even if a breach had no bearing on that claim.
Another major change concerns breaches of warranty. Previously insurers relied on a clause in the policy wording which stated that the policyholder’s undertaking that all information provided is ‘true and complete’ constitutes the ‘basis of the contract’ to reject all claims when any breach of warranty occurred – even if this breach was not material to the circumstances of a claim. The new law bans this. Insurers must now pay in full all claims where any breach of warranty had no bearing on the risk in question. This is excellent news for commercial policyholders.
The new legislation also introduces a number of changes intended to strengthen insurers’ rights – particularly in relation to fraud on the part of the policyholder – but that, as they say, is another story. The Act’s overall effect – one which should be welcomed by all parties – is to clarify an area of insurance law that was previously notably opaque. This is unlikely to be the end of the story – but is certainly a step in the right direction.
