The Insurance Act 2015
Throughout 2014 we told you about our support for the Government Billon insurance law reform. This was designed to improve clarity around the insurance contract for commercial customers and better reflect the way we choose to do business in the 21st century. We are delighted that this resulted in The Insurance Act 2015 receiving Royal Assent on 12 February 2015.
What does the Act include?
To summarise, the key elements of the Act are as follows:
1. Duty of Disclosure & Representation – The existing duty remains and is clarified with the requirement for businesses to make a ‘fair presentation’ of their risk to insurers.
2. Remedies for Non-Disclosure or Misrepresentation - Remedies must now be proportionate and reflect the actual underwriting impact, had the correct information been provided originally.
3. Basis of Contract Clauses – Are abolished removing mechanisms which allow avoidance if risk information provided is inaccurate.
4. Remedy for Breach of Warranty – Warranties can continue to be applied but breach will now mean liability is only suspended for the period of the breach and only where relevant to a claim.
5. Remedy for Fraud – The new remedy removes the option of avoidance. In the event of fraud an insurer remains ‘on cover’ for claims made before the fraud occurs but has the option to cancel the policy with effect from the date of the fraudulent act.
What does this mean for you?
Our support for the original proposals, and our previous work on increasing the reliability of the insurance contract, means that we’re already living and breathing many of the philosophies of the Act. However, we’re committed to taking that further.
· We’ll work with you to achieve fair presentation of a risk through fully understanding the risk and the customer profile. In the event of a claim, where fair presentation has not been made, we will continue to adopt a fair, pragmatic and transparent approach.
· The Act provides that an insurer may not rely on the insured’s breach of a term to avoid paying a claim if the breach could not have increased the risk of loss. This has long been Aviva’s approach and our wordings are predominantly “warranty free”.
· Basis Clauses will not affect claims or losses with immediate effect.
· We’ll update all policy documentation to reflect these changes.
· As part of our commitment to improving clarity and certainty for customers we will also continue with the rollout of our improved product set which started with Property Owners in November last year. You will shortly see our new approach to our on-line Property Owners products, for example.
The Act is an important step on the journey to improved certainty for customers and we will continue to engage with you as we move forward with implementation.
For further information on The Insurance Act 2015, please contact:
Tim Parish, Corporate and Speciality Risk, on 0207 157 2728 for Corporate, or
Jonathan Smith, Commercial Underwriting, on 07885 648187 for SME business.
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