This month, the British Government introduced a new Insurance Act, which aims to make business insurance clearer for new, renewed and reviewed policies.
Focused on fairness, transparency and certainty, the Insurance Act affects the rules governing contracts between businesses and insurers. As a result, there will be changes to both how you arrange business insurance and make claims.
Here’s what you need to know:
Arranging a policy will be more transparent
As before, you must tell your insurer about ‘material facts or circumstances’ about both you and your business, but now there is a heightened requirement for you to make a ‘fair presentation’. Broadly, this means giving the insurer accurate details of matters that would affect their underwriting decision in a clear and accessible manner. The new act also needs you to make a reasonable search for information within your business, in order to ensure all details are disclosed. This could involve speaking with board members, solicitors or risk advisers.
What that means to you: You’ll need to factor in time to gather relevant, accurate information and make sure all relevant staff have contributed. You should also be prepared to answer questions from your insurer or broker if there is any ambiguity.
The claims process will be proportionate
Before August, if you didn’t provide accurate ‘material facts or circumstances’ when arranging your commercial insurance – intentionally or not – the insurer could cancel your policy and dismiss any claims. Under the new law, if it wasn’t intentional or reckless, ‘proportionate remedies’ come into play.
What that means to you: Your insurer has to decide what it would have done had it received accurate information at the start. If it would have cancelled your policy and returned your premium, it is entitled to do so. If that isn’t the case, they must pay part of your claim. The amount paid is calculated by looking at the cover, terms and premium they would have issued versus the cover you purchased.
Terms will be fairer
Warranties are terms put in place by your insurer to make sure you do something, for instance setting a burglar alarm. In the past, if you hadn’t adhered to these terms, your insurance claim would be invalid – even if you set your alarm on the day of a burglary. The new law means insurers can’t be so punitive.
What that means to you: Under the new law, if you have not complied with a warranty, provided that it has no bearing on the loss or you were not in breach at the time of the loss, your claim cannot be totally dismissed. For example, if your alarm was set on day of the theft, you would be paid – even if it was off at other times.
Having an insurance broker you can rely upon to gather the necessary information will help you to navigate the changes to the law. At Alan Boswell Group, we’ll work with you to identify what you must disclose and how it should be stored for audit purposes.
To find out exactly how the Insurance Act works or call us on 01603 218000 to review your commercial insurance policies.