News
04/08/2016 Insurance Act 2015
Insurance Act 2015
Introducing
fairer contract terms
The Insurance Act 2015 (the Act) comes into effect 12th August 2016 and
is intended to create a fairer contract between policyholder and insurer, by
imposing new duties for all parties involved in the arrangement of your insurance
policies, including you the policyholder.
The Act sets out the principles to be followed so that it can apply
equally for small businesses right up to the largest corporations.
Key changes to current business practices will impact policyholders,
insurers and insurance brokers in the following areas:
·
Fair Presentation of Risk
The new duty to make a Fair Presentation of Risk is
one of the most fundamental changes brought about by the Act. Whilst the
general requirement to disclose facts ‘that are material to the prudent
insurer’ has not changed, the Act sets out in more detail the type of
information that needs to be disclosed, who needs to disclose it and how it
needs to be disclosed. The intention is that the customer and their broker disclose
all relevant information before the insurance contract or any change in
cover commences. Both the insurer and the insured are encouraged to make sure
that they are clear as to what information the insurance contract will be based
on.
· Remedies (for
Non-Disclosure or Misrepresentation)
The Act
introduces a new approach in this area, providing proportionate remedies
where fair presentation has been breached, and abolishing policy avoidance for
a breach of the "Duty of Utmost Good Faith".
· Warranties and
Conditions
Currently an insurer may avoid liability to
pay a claim under a policy if there has been a breach of a warranty, even if
that warranty is later complied with, or if it is completely unrelated to the
cause of the loss. Under the Act, all warranties will become "substantive conditions" which means that cover is only
suspended during the period of noncompliance with the warranty.
It means that insurers
will therefore be responsible for
any losses incurred
after the breach
of warranty has been remedied. Also if
the compliance with the warranty would not have prevented the loss taking place, then the insurer
cannot avoid liability for the claim.
· Fraudulent Claims
The Act clarifies the remedies
available to an insurer if a fraudulent claim is made.
· Contracting Out
The Act provides
for parties of an insurance
contract to agree
to contract terms which are less favourable than
those stipulated in the Act, provided the
insurer satisfies two transparency requirements:
o
To draw the insured's attention to any disadvantageous term before the contract is entered into
o
That the disadvantageous term is clear and unambiguous as to its effect
The Act replaces the longstanding
"Duty of Disclosure" which required a policyholder to disclose risk
information to insurers before entering into an insurance contract, with a
"Duty of Fair Presentation".
How will this affect you
and your relationship with GJIS Ltd?
Fair Presentation of Risk
Because GJIS have always had an eye for detail in our dealings we do not
anticipate any changes. Our discipline
and practise has always been one of knowing our client and understanding their
business. In fact, for years, we have summarised all the information about your
business and based on these have advised you how best to insure according to
your attitude to risk.
All you need to do is to agree that these summaries are a fair
representation of your business … or tell us where there are inaccuracies.
Remedies, Warranties and
Fraudulent Claims
In our experience an Insurer will treat
their policyholder fairly when there has been a genuine error or
misunderstanding so in practice proportionate settlement is nothing new.
Formalisation removes the element of uncertainty and the ‘status quo’ that all
statements about your business are accurate remains.
Contracting Out
Our main line insurers will
not be ‘Contracting Out’ and therefore the default stance will be that any
policy we arrange will be covered under the terms of the Act. As agents that
specialise in arranging insurance for jewellers there is always the possibility
that an Insurer may wish to ‘contract out’ or apply special restrictions.
Should this be the case you will be advised of any shortcomings in protection,
thus satisfying the ‘transparency’ requirements.
To read more about the Insurance Act 2015 please click here.
