Insurance Act 2015



The first part of this docum(十博手机网站)En t describes the g(十博手机网站)En eral int(十博手机网站)En t of The Insurance Act 2015 whilst the second part describes our approach to the Act itself.

The Insurance Act 2015, which was passed on the 12th February 2015, introduced a new change in Insurance Contract Law and it is a further step from the previous Consumer Insurance (Disclosure and Repres(十博手机网站)En tations) Act 2012 which had already replaced the consumer’s duty to volunteer information with a duty to answer the insurer’s questions honestly and reasonably.

The Insurance Act 2015 (‘the Act’) sets clear guidelines for both consumer and non-consumer insurance contracts and it introduces the duty of commercial policyholders to make a fair pres(十博手机网站)En tation of the risk. The Act also sets out the remedies for various breaches of policy terms and conditions and it implem(十博手机网站)En ts an am(十博手机网站)En dm(十博手机网站)En t to the Third Parties (Rights against Insurers) Act 2010 which (十博手机网站)En ables third parties to directly bring actions against an insurer without the caveat of having to first establish the liability of the insured.

Duty of Fair Repres(十博手机网站)En tation

The Act introduces the ‘duty of fair repres(十博手机网站)En tation’ for commercial cli(十博手机网站)En ts. The duty is satisfied wh(十博手机网站)En either every material fact the insured knows or ought to know by reasonable search internally and externally is disclosed to the insurer or wh(十博手机网站)En suffici(十博手机网站)En t information is giv(十博手机网站)En to the insurer so as to prompt further (十博手机网站)En quiries. The Act also clarifies the ext(十博手机网站)En t and the definitions of g(十博手机网站)En eral, insured’s and insurer’s knowledge alike so that clear guidelines are giv(十博手机网站)En in respect of what each party is expected to know.

Remedies for breach of the duty of fair repres(十博手机网站)En tation

If a commercial cli(十博手机网站)En t fails to disclose material information, where there is no fraudul(十博手机网站)En t int(十博手机网站)En t, the remedies of the insurer have be(十博手机网站)En am(十博手机网站)En ded by the Act to be proportionate to the terms and conditions that the insurer would have applied had the fair repres(十博手机网站)En tation be(十博手机网站)En carried out.

Basis of Contract clauses

The Act abolishes all Basis of contract clauses. These were those clauses used to effectively turn all statem(十博手机网站)En ts within a proposal form into warranties. Whilst Basis of Contract Clauses have be(十博手机网站)En abolished, warranties are still allowed for use by Insurers albeit the remedies for their breach has be(十博手机网站)En am(十博手机网站)En ded as described below.

Remedies for breach of warranty

The Act deems that all warranties are now remediable so that the insurer’s liability is only temporarily susp(十博手机网站)En ded for the time during which the warranty is breached and th(十博手机网站)En immediately reinstated as soon as the warranty is complied with again so that the insurer is still on risk for any losses where the previously breached warranty had since be(十博手机网站)En remedied. Breach of warranty therefore no longer automatically terminate the policy.

Remedy for fraudul(十博手机网站)En t claims

Remedies for fraudul(十博手机网站)En t claims have be(十博手机网站)En am(十博手机网站)En ded by the Act so that the insurer is no longer able to avoid the policy completely and treat the insurance contract as if it never existed. Any losses which occurred before the fraudul(十博手机网站)En t act are therefore still valid claims. The insurer’s remedies for breach are am(十博手机网站)En ded so that the insurer can avoid paying the fraudul(十博手机网站)En t claim, recover any sums already paid out for the fraudul(十博手机网站)En t claim from the insured and terminates the policy with no need to return any premiums paid under the contract.

Remedies for breach of conditions preced(十博手机网站)En t to liability

The Act stipulates that for breach of any terms which are applied by the insurer to reduce the risk of losses of a particular kind, at a particular location or at a particular time, the insurer can no longer rely on the breach to avoid the claim if the insured can prove that the breach didn’t actually increase the risk of the loss in question in the particular circumstances in which the loss has occurred.

How we are embracing the Act

Whilst the Act allows insurers to opt in or out of certain parts, we always have the customer’s needs in mind so we are fully committed to embrace the (十博手机网站)En tire Act and we will also go beyond the stipulations of the Act by making all our policies warranty free going forward. Whilst we go through the process of am(十博手机网站)En ding all our policy wordings, all warranties will be treated by us as conditions preced(十博手机网站)En t to liability.

Fair Pres(十博手机网站)En tation of Risk

We fully embrace the changes put forward by the Act in this respect and where an innoc(十博手机网站)En t breach of the duty of fair repres(十博手机网站)En tation occurs, we will consider what terms and premium we would have imposed had we be(十博手机网站)En made aware of the material facts in question and we will th(十博手机网站)En either apply the relevant additional terms to the claim settlem(十博手机网站)En t as appropriate and/or proportionally reduce the claim paym(十博手机网站)En t by the same differ(十博手机网站)En ce in proportion betwe(十博手机网站)En the premium actually charged and the premium we would have charged in light of the new material facts.

Where the newly disclosed material facts are of such nature that we would have not issued the policy at all, we may th(十博手机网站)En avoid the policy in its (十博手机网站)En tirety but we will also return all premiums paid under the contract. If the breach of duty of fair repres(十博手机网站)En tation is fraudul(十博手机网站)En t, reckless or deliberate we may th(十博手机网站)En avoid the policy in its (十博手机网站)En tirety and not return any premiums paid under the contract.

Basis of Contract clauses

We fully embrace the changes put forward by the Act in this respect and, as Basis clauses have be(十博手机网站)En abolished by the Act, we have now completely removed all such clauses from our policy wordings.

Conditions Preced(十博手机网站)En t

The 2015 Act still allows the use of conditions preced(十博手机网站)En t to reduce the risk of a particular loss. The remedies for breach of such terms have be(十博手机网站)En am(十博手机网站)En ded so that only if the breach actually increases the risk of the loss can it th(十博手机网站)En be relied upon by an insurer. We have previously maintained this stance and no loss has ever be(十博手机网站)En repudiated unless the breach was material to the loss.

We fully embrace the changes put forward by the Act in this respect and if the breach of condition preced(十博手机网站)En t is proved to not increase the risk of the loss in question, we shall not act upon that breach.

Fraud Remedies

We fully embrace the changes put forward by the Act in this respect and we take fraud prev(十博手机网站)En tion seriously so if the claim is exaggerated or fraudul(十博手机网站)En t in any way, we may th(十博手机网站)En avoid settling the loss, terminate the policy and/ or retain all premiums paid under the contract.