The Law Governing Commercial Insurance Has Changed - This Is What You Need To Know
For many business managers, insurance forms a small, yet critical part of the role – but rarely an aspect that businesses would choose to understand from a detailed, legislative perspective.
As busy people you have instead rightly come to rely on the advice and guidance of an expert broker to navigate you through the process of insuring in a simple and efficient fashion. Likewise when important changes happen to the industry, such as the implementation of the Insurance Act 2015, you should rely on your broker to help understand the key reforms this Act is designed to bring about and how they will affect you and your business.
From 12th August 2016 the way insurance is traded changed for the first time in over 100 years. There are implications on the broker to make sure we ask more questions about your business, but also implications on our customers to ensure more information is identified and disclosed.
What specifically changed?
As the broker of your policy we now need to ask a lot more questions about your risk and its composition. We have always had a duty to gather as much information about a risk as possible to allow an insurer, or broker on an insurer’s behalf, to be clear about the risk being presented. What has changed is that you will need to disclose to insurers “every material circumstance” which you “know or ought to know”, or failing that provide “sufficient information to put a prudent insurer on notice that it needs to make further enquiries for the purpose of revealing those material circumstances”. In simple terms, we all need to do a bit more digging and if you need more time to dig you should let us know.
As the customer, the Act places an onus on you to now disclose:
- Things which you know about which are material to arranging the insurance
- Things which if relevant, other senior management know
- Information which can be revealed by a reasonable search
Similarly you do not need to tell us:
- Information which reduces the risk
- Matters of common knowledge
The golden rule is if you are unsure about the relevance of the information, you should always disclose it.
You will also need to take great care in gathering the information and in most cases engage other members of the business to ensure the information you disclose is correct, and more importantly is complete.
Likewise, the insurer/broker has to ask the correct questions at the outset, sufficiently probing to identify the information that may impact on your offer of cover and recording the responses thoroughly.
Additionally the Act sets out new guidelines for insurers to offer alternative solutions to simply cancelling a policy because of non-disclosure about a risk; known as ‘proportionate remedies’. Failure to comply with warranties will no longer automatically terminate an insurance policy, instead the breach only becomes relevant if it relates to the loss being claims for. Finally you will have to give yourselves more time to gather all required information in preparation for your renewal; insurance can no longer be arranged at the last minute.
All insurers and brokers are required to do this. Failure to abide by the Act by either party risks significant exposure to your business and compromises the legitimacy of the cover you buy.
In partnership with you, we will ensure that these changes are delivered as smoothly as possible. We have a team of experienced advisors to help guide you through the process. As a customer who depends on your insurance to respond when you need it, we actively insist on challenging all providers to explain what they are doing to embrace the changes under the Insurance Act 2015 to avoid their clients being unduly exposed.
We've created an at-a-glance guide to what you need to know - download it here:
By working with MIAB you can be sure that your business is ready for the changes post 12th August 2016, however should you have any questions about the Insurance Act 2015 prior to renewal, please get in touch.