Many of you will have heard a lot about the Insurance Act 2015, which comes in to force in August 2016.

There are many changes in the Act, the majority of which are to the benefit of commercial customers.

One in particular is that insurers can no longer void the policy if the insured fails to make a “fair presentation”, if the insured’s failure is neither deliberate or reckless.

If the insurers can prove they would have charged a higher premium if they had been aware of all the material circumstances then the remedy in the Act states that that they can proportion down claim payments accordingly.

Thus if the original premium was £10,000 and insurers can demonstrate that they would have charged £20,000 if they had been aware of all material circumstances then insurers can reduce claim payments proportionately.

If there is a £500,000 claim the insurers could thus only pay £250,000.

I can see why this might act as a better deterrent to misrepresentation than only providing insurers with the remedy to increase their premium retrospectively,

I can also see how it can work on a property damage or other first party claim – it’s a bit like average if you are as old as me and remember average!

However, the remedy must pose practical issues on liability claims when insurers often make claim payments to the claimant or lawyers not to the insured.

 Perhaps this is one reason why insurers such as Zurich are adopting an additional premium approach rather than adopting the proportionate reduction in claim remedy under the Act. See below.

 Obviously the Insurance Act 2015 is an important change taking place in the U.K. in 2016 and in all my technical insurance training workshops I address its implications.

Posted by Neil Park May 08, 2016