The Law Concerning the Information that Businesses Need to Provide to Insurers is Changing


August 2016

The 12th August sees the introduction of the Insurance Act which up-dates the regulations that govern the relationship between businesses and their insurer. The aim is to give greater transparency and reduce disputes, with insurers having the information that they need to underwrite the risk on the correct terms and for businesses to have insurance that responds to claims. The Act will apply to new policies, renewal of existing policies and changes made to existing policies on or after 12th August.


Under the Act the insured business must make a fair presentation of the risk. What this involves will vary with different businesses, but it does mean that information about the risk must be presented clearly and straightforwardly. This will involve making relevant enquiries within the business, which must include the senior management and relevant third parties involved in the business such as accountants and anyone insured under the policy.


The Insurer has a number of remedies where a fair presentation of risk is not made. Where it is deliberate (including fraud) or reckless, they can avoid the policy from inception and keep the premium. Where it is not deliberate or reckless they can:


1. Avoid the contract and repay the premium if they would not have accepted the risk had they known the information that subsequently comes to light.


2. Proportionally reduce the claims payment if they would have charged a higher premium.


3. Impose new terms and conditions if these would have been applied had they known all the information.


Few businesses look forward to their annual renewal and for some it's simply a case of cost, but it is really important to have the right advice and to make sure that the cover is correctly arranged so that claims are fully paid. Insurers also have the right to opt out of the Act in whole or part. Again, it is important to understand what this means.


The above is an overview of the Act and if you would like to discuss the impliactions of the Act for your business we would be pleased to hear from you. Please contact Keith Blackett or David Donald on 01303 290866.


In our next blog on the Act we will consider warranties


The Law Concerning the Information that Businesses Need to Provide to Insurers is Changing


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