The Insurance Act 2015 comes into effect on 12th August 2016 and will apply to all commercial insurance policies. It is the most significant change in UK insurance law since the 1906 Marine Insurance Act and its intention is to provide a fairer system so that the opportunities to avoid paying claims are greatly reduced.
Duty of Fair Presentation
The Act sets out a new duty for you as a business owner to make a fair presentation to the insurer. What does this actually mean for you? As a business owner you must disclose every material circumstance which you know or ought to know. Failing that, you should disclose sufficient information to put a prudent insurer on notice that it needs to ask further questions to reveal the material circumstances. To relate this to your business, it means that you must provide full details of the following:
- Your business activities including processes
- Your products/services and details of end-users
- Your premises including location, construction, heating, security
- Previous claims or ‘near misses’
- Any facts which could be considered special or unusual when compared to similar businesses
These are only a few examples and the expertise of chartered insurance broker will be of great benefit in helping you to identify the material circumstances which ought to be disclosed. Failure to make a fair presentation could result in a claim settlement being reduced or not paid at all.
Carry Out a Reasonable Search
In-depth discussions between an insurance broker and those in your business who are responsible for business activities (defined within the Act as senior management) including the placement of insurance will lead to greater understanding of your obligations. As a business owner you will be required to carry out a reasonable search which is determined by the size and complexity of the business. There may be others important to your business who hold relevant information which should be disclosed. By way of an example, you may outsource your Health and Safety checks to a third party or your IT systems may be maintained by an outside company. Your reasonable search should include these third parties.
Safeguard Your Business
The duty of fair presentation applies to ALL commercial insurance policies. The obligations under the Act affect sole traders and SME businesses – they are not just relevant to large corporate organisations. Understanding your obligations and making sure that you inform the insurers of all material circumstances are crucial to safeguarding your business. A chartered insurance broker will take the time to get to know your business and help you to fulfil your insurance obligations and ensure that your business risks are correctly protected.
If you would like to discuss how I can help you then please get in touch.
Compiled using information from:
The Broker Network Insurance Act Workshop
BIBA Mactavish Insurance Act 2015: An Introductory Guide