Major shake-up in insurance law just weeks away

The most significant reform of the UK insurance contract law since the Marine Act of 1906 comes into force early next month and farmers and rural businesses are being urged by H&H Insurance Brokers to understand how it will affect them and their insurance policies.

At the heart of the Insurance Act 2015, which applies mostly to non-consumer insurance contracts from August 12th 2016, is a duty for businesses to share all relevant information with their brokers. Other changes include the effect of a warranty contained within the policy and the Insurer’s remedies for fraudulent claims.

H&H Insurance Brokers, which specialises in rural & commercial insurance across Northern England and Southern Scotland, is calling on its customers to make themselves aware of the changes.

In a nutshell customers must disclose all relevant information relating to their insurance or risk losses as Paul Graham, Operations Director, responsible for compliance at H&H Insurance Brokers explains:

“These are the biggest changes to insurance contract law for over a hundred years and it’s rebuilding the very foundations of insurance contract law. The Insurance Act 2015 was brought in by Parliament to reflect changes in the insurance industry in recent years and ensure that both customers and insurers are fairly treated.

“Every non-consumer insurance contract will be affected from August 12th this year so it is vital that all businesses understand of what is required from them – and our responsibilities as their Insurance Broker- under the terms of the new Act.

“That means if you’re looking for commercial insurance, you really have to prepare your information to discuss with your broker.

In practice, the changes mean that customers have a duty of disclosure when they are setting up an insurance policy. Although insurance contracts will still be based on good faith, the onus is now on customers to fairly present any risks to their brokers. The information must be correct to the best of the customer’s knowledge, and there is also a requirement for customers to carry out a reasonable search for information to ensure they are presenting the full facts.

People who make a deliberate or reckless misrepresentation – i.e. they knew they were not disclosing the full facts – face their policy being voided. In such cases, no claims will be met and there will be no refunds of any insurance premiums. Insurers will also have the ability to reclaim any payments made in a fraudulent claim.

In the event of an honest mistake or omission of information, if the insurer can prove they would not have written the policy under those terms, it can void the policy and repay the premiums. If the insurer would have accepted the risk on different terms, the contract can be treated as though the terms were included, and if they would have charged a higher premium, the insurer can proportionately reduce the pay out in the event of a claim.

For businesses, the new Act offers extra levels of protection. Insurers will no longer be allowed to avoid a claim when a customer breaches a warranty but instead, the cover can be suspended while the breach is remedied. Customers will be required to tell their insurers about breaches of warranties and the responsibility is on them to monitor compliance with these warranties.

Understanding the implications of the new Act is a complex business but fundamentally, it’s all about transparency and sharing information.

Mr Graham said “All staff at H&H Insurance Brokers have completed in-depth training so we will be able to provide clients with the information they need and answer the questions that will now be asked of them. “As we head towards August 12th and the new regulations coming into force, we are reviewing our process and working with our partners to ensure a seamless transition to the new Act.

“But it really is terribly important that farms and rural businesses prepare their information. It is their responsibility to disclose the information and our responsibility to ask about the business, so expect to be asked more questions when you are applying for or renewing insurance. We will be contacting customers in good time before their next renewal to formally begin the process.”

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