The Insurance Act 2015 comes into force on 12th August 2016. Its aim is to introduce greater clarity around what information a client has to provide the insurer.
This should lead to a fairer position should the client fail to provide the information. This Act will make sure all parties clearly understand what each needs to know and what will happen in the event of a claim.
The Insurance Act 2015 introduces the concept of a fair presentation. This requires policyholders to:-
- Disclose to insurers ‘every material circumstance’ which the insured knows or ought to know
- Provide the insurer with ‘sufficient information’ to put a prudent insurer on notice that it needs to make further enquiries into those ‘material circumstances’.
- The policyholder’s disclosure must be reasonably clear and reasonably accessible – information must be presented in a logical and clear fashion.
- The policyholder is considered to know or ought to know matters expected to be revealed by a reasonable search of information, anything known by a person responsible for their insurance within the business and known by anyone who is part of the organisation’s senior management.
If a fair presentation has not been provided, the remedy an insurer can apply varies depending on whether or not the non-disclosure of information was deliberate or reckless.
If it is viewed deliberate or reckless the insurer can avoid the policy, refuse all claims and keep the premium paid.
If non-disclosure was not deliberate or reckless, proportionate remedy will apply. This means the insurer has to consider what they would have done had they known the complete position. If the insurer would not have accepted the risk at all, then they can avoid the policy and refuse all claims but they must return any premium paid.
If they would have underwritten the policy but on different terms (such as added a warranty), then these changes will apply retrospectively. If they would have charged a higher premium, then the claim settlement will be reduced proportionately.
Using a reputable broker should help policyholders with these changes. They will know the right questions to ask and dig deeper into a potential issue to present to insurers should the need arise.
If you have any questions regarding this new Act, please feel free to contact me.