The Insurance Act comes into force on 12th August 2016 and will apply to all commercial insurances arranged or amended after this date. One of the key aims of the Act is to ensure better exchange of information between insurers, brokers and customers, which should make it simpler and easier for businesses to get claims paid.
The Act introduces a “duty of fair presentation” which clarifies what an insured must disclose to an insurer and what an insurer ought to know about its insured.
The central requirement of Fair Presentation is still to share all material facts, accurately and in good faith. The fair presentation of risk clause requires you to provide information which includes:
Accurate and complete information to the best of your knowledge
Information to be collated from all key individuals who decide how the business is run including any outside sources
Reasonable searches – Sufficient enquiries to build a picture of your risk
Clear and accessible disclosure of material risk information
Fair Presentation – How it fits together
Insurers’ remedies for breach of duty of fair presentation
If a policyholder deliberately or recklessly fails to make a fair presentation of the risk, Insurers may:
avoid the policy and retain the premium and
recover any amounts paid (eg claims) or expenses incurred.
If the failure to make a fair presentation is NOT deliberate or reckless, Insurers may do one or more of the following, depending on what action they would have taken had they known all the material facts:
if they would not have entered into the policy they may avoid cover and return any premium charged together with recovery of any amounts/expenses incurred.
if they would have entered into the policy, but on different terms and/or with additional premium, they may apply those different terms to the policy and/or charge the additional premium.