How the Insurance Act 2015 Could Affect You

Guest post from Interface auditor Amanda Lakeland
One of the changes I have come across while auditing was the new Insurance Act 2015 which had to be implemented by August 2016.

(Following excerpts taken and modified from out-law.com, read the article in full here )

The 2015 Insurance Act (2015 Act) applies to all commercial contracts of insurance, and variations to existing contracts of insurance, from 12 August 2016 and introduces what the UK government has described as “the biggest reform to insurance contract law in more than a century”.

The Act introduces substantial changes to the laws governing disclosure in non-consumer insurance contracts; warranties and other contractual terms; and insurers’ remedies for fraudulent claims.

In the past, insured parties had to disclose every circumstance that they knew which would influence an insurer in fixing a premium or deciding if they should underwrite a risk. This required insured parties to predict, without much guidance, which factors may affect a prudent insurer. This was also true of brokers acting on behalf of insured parties.

Part 2 of the 2015 Insurance Act has created a new ‘duty of fair presentation’ aimed at encouraging active, rather than passive, engagement by insurers as well as clarifying and specifying known or presumed to be known matters. From 12 August 2015, before entering into a contract of insurance, insured parties must disclose either:

  • every matter which they know, or ought to know, that would influence the judgement of an insurer in deciding whether to insure the risk and on what terms (similar to the current legislation); or
  • sufficient information to put an insurer on notice that it needs to make further enquiries about potentially material circumstances.
  • Insured parties will be considered to have known, or ought to have known:
  • matters that could be expected to be revealed by a reasonable search of information available to the insured party – for example, information held within an organisation or by a broker;
  • anything known by a person responsible for their insurance – for example, a broker;
  • insured organisations will also be deemed to have the knowledge of anyone who is a part of the organisation’s senior management, or who is responsible for their insurance.
  • Insurers will be considered to have known, or ought to have known:
  • matters known to individuals who participate on behalf of the insurer in deciding whether to take the risk and on what terms – for example, underwriting teams;
  • knowledge held by the insurer and readily available to the person deciding whether to take the risk;
  • matters known by an employee or agent of the insurer and which should reasonably have been passed on to the person deciding whether to take the risk.