The new Insurance Act 2015, which will automatically apply to all insurance policies you enter into from August 2016, is set to be the most substantial reform of UK business insurance law in over 100 years. The Act, which was prompted by concerns that the current law is dated and imbalanced in favour of insurers, will reform the law on a number of issues, including duty of disclosure, warranties and fraudulent claims.

Duty of disclosure

Under the new Act, you will be required to make a “fair presentation” of the risk you pose to an insurer when taking out an insurance policy. This means that you must disclose all material circumstances - any unusual or special circumstances that may increase the risk of you making a claim - that relate to the insurance policy you wish to take out or, failing that, give the insurer the information it requires to make further enquiries into the risk that you pose. The Act will also require you to disclose this information in a clear and accessible manner. This means that you will be discouraged from bombarding the insurer with vast quantities of information in the hope that information relating to your material circumstances will be found within it.

In addition, the Act will ensure that any remedies for a breach of “fair representation” are proportionate. In the event of a deliberate or reckless breach of “fair representation”, your insurer will be able to keep your premium and refuse to pay out for your claim, while in the event of an intentional breach, the insurer will be able to choose a remedy based on the actions it would have taken had you made a fair representation. For example, if the insurer would not have entered into a contract with you, it will be able to return your premium and refuse to pay out for your claim. If the insurer would have entered into a contract on different terms, it can treat the contract as if the different terms had been agreed with you. For example, if it would have charged you a higher premium, it would be able to reduce the amount it pays out for your claim.
 

Warranties

The Act will make warranties suspensive, which means that your insurer will not have to cover you while you are in breach of a warranty, but it will have to cover you if and when you remedy the breach. It will also eliminate “basis of the contract” clauses, which turn any representations you make prior to entering into a contract into warranties. Where there is a policy term – including a warranty – intended to reduce the risk of a particular kind of loss at a particular location or time, your insurer will not be able to rely on a breach of such a term to avoid paying out for your claim if it is clear that the breach did not increase the risk of the loss. For example, if you take out a property insurance policy that requires you to maintain a burglar alarm and you fail to do so, the Act will prevent your insurer from being able to rely on the breach to avoid paying out for a flood damage claim. However, it will enable your insurer to rely on such a breach to avoid paying out for a theft claim.
 

Fraudulent claims

The Act will clarify the law in relation to your insurer’s remedies for fraudulent claims. Your insurer will be able to refuse to pay out for any losses suffered after a fraudulent act, but must pay out for any losses suffered before the fraudulent act.

The Act, which is intended to be the default position for commercial contracts, will bring insurance law up-to-date, balancing more fairly your own interests with those of your insurer.

To discuss your motor insurance and to obtain a competitive quotation, call Reader’s Digest Insurance Services today on 0208 069 3102.

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