This year saw extensive reforms in the insurance market when the Insurance Act 2015 came into force from 12th August 2016. The aim being to introduce greater clarity around what information a proposer has to provide to their insurer. This is therefore important to trustees when arranging insurance cover for trust assets.
As way of background the original principal of “Utmost Good Faith” (i.e.; on risk information to be disclosed to underwriters) dates back to insurance legislation from 1906, with no changes made since then. The new Act will make sure all parties clearly understand what each needs to know and what will happen in the event of a claim. It sets out principles of a fairer, more balanced legal position which relies on ‘strong disclosure’ practices which include undertaking a ‘reasonable search’ of available information. If followed, it’s more likely that cover will meet business needs and customer expectations, and that the cover will operate in full, as intended.
The Act calls this ‘fair presentation of risk’ and this will mean all parties clearly understand what needs to be advised to insurers and how claims will be handled. In the past a policy might have been avoided – with all claims refused – on the basis that material information was not shared or was incorrect. The Act will change this. Provided the information supplied is not intentionally or recklessly incorrect, a ‘proportionate remedy’ will apply, depending on what the insurer would have done had a fair presentation been made. This means, for example, the claim settlement could be amended to reflect the missing information.