The UK’s new Insurance Act 2015 is coming in to force in August this year, and will represent the most important change in law for the commercial insurance market in more than 100 years.
The Act aims to create a fairer legal framework for resolving claims that addresses some anachronisms of British insurance law. It also aims to encourage professional conduct across all parties in the insurance transaction. In short, the Act aims to make insurance reliable not only by making sure the rules are fair but also by encouraging proper understanding of risk.
Mactavish have long championed the need for this reform.
The Insurance Act builds on much of the existing insurance law framework, but also makes a number of important changes. The most important of these are that it:
- redefines the policyholder duty of disclosure as one requiring a “fair presentation” of risk
- amends the way in which warranties and conditions operate in insurance policies
Both of these directly affect how an insurance policy is arranged. First, there are additional guidelines around how a risk needs to be investigated and described to meet the new standard. Second, policy wordings may operate differently and specifically insurers may opt to contract out of certain parts of the Act; this must be properly explained to policyholders to ensure the industry as a whole treats its customers fairly and brokers meet their professional and legal duties.
Brokers must consider the increased advisory risk associated with the Insurance Act. It is new legislation affecting every business that buys insurance, and its impact must be explained. This risk is increased by any gaps in a broker’s understanding, for obvious reasons. However, it is also increased by insurer commitments around the Act which are inconsistent or unclear, creating a significant risk for the broker if misrepresented to the policyholder.
Mactavish has been commissioned by BIBA to author the BIBA Insurance Act Implementation Guide for brokers which will examine the detail and provide in depth guidance to help brokers navigate through this period of change. The Guide will be launched at the BIBA conference in May 2016 and will be available to all BIBA members.
Published in Insurance Age on 1st April 2016.