The UK has waited over a century for the major reforms that make up the Insurance Act 2015 and two other important Acts of Parliament. The reforms, which will impact far beyond the UK, come in the form of:
• The Third Parties (Rights Against Insurers) Act 2010
• The Consumer Insurance (Disclosure and Representations) Act 2012
• The Insurance Act 2015
It is the Insurance Act 2015, dealing with commercial insurance policies, that has perhaps made the headlines more and more over the past year at least. The current law on commercial insurance is founded on a 1906 statute, the Marine Insurance Act, which itself codified case law from back in the eighteenth and nineteenth centuries.
The Insurance Act 2015 will apply to policies incepted or renewed from 12 August 2016 and is designed to change the law to reflect modern business relationships and to rebalance rights and remedies when things go wrong. To some, 12 August 2016 may still seem some time far away but it is worth noting that it is little more than one underwriting cycle.
The Act deals with the following main issues:
• The duty of disclosure that applies to businesses seeking insurance cover and introduces the new duty to make a “fair presentation” of the risk for which cover is being sought.
• It provides for insurer’s remedies for breach of this new duty of fair presentation.
It clarifies:
• The legal remedies that apply if a warranty, a technical clause in the policy, has been breached.
• It stipulates that breaches of policy terms that are irrelevant to the claim should not affect the validity of the claim (an example being a failure to maintain a burglar alarm having no effect on a claims for water damage).
• It clarifies an insurer’s remedies for fraud more clearly than in the case law to date, and
• Contracting out.
This thorough overhaul of insurance law in the UK commands wide support among the insurance community and its corporate customers alike. It is hoped the Act will provide a firm a foundation for the business of insurance in the twenty first century as the Marine Insurance Act did for the first half of the twentieth century.
For more information and further details on the Act, click here to access our Time for Change document.
David Hertzell is former Law Commissioner and consultant at risk and insurance law business, BLM.
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