Are you ready for the New Insurance Act 2016?
For over 100 years, the contract law that governs insurance policies for businesses has remained the same. In an effort to modernise the British insurance industry, new laws came into force on August 12th 2016. This New Insurance Act makes changes that focus on balancing the interests of both the insured and insurer.
The outcome of this will hopefully mean less government spending. This Act should save around £100 million through lower legal costs over the next decade. The New Insurance Act aims to put businesses and insurers on a level playing ground.
A few of the key points to take away are;
It is no longer the responsibility of the insured to disclose anything that may influence the decision insurers take on whether to insure them as a risk or the premium at which they do so. The new Act has a ‘duty of fair presentation’. Therefore, if the insurer requires further enquiries, they may instigate them. The Insured party would be responsible for providing sufficient information to allow this.
A breach of warranty could relieve the insurer of all liability, under the old Act, even if the insured party could prove that it was unrelated or rectified.
The New Insurance Act dictates that in the event of a breach of warranty, the liability of the insurer is suspended rather than being totally withdrawn. The Insured party fixing the breach will resume cover. If they are able to prove there is no direct link between the warranty breach and the claim, the insurer has no grounds upon which to decline cover.
3. Remedies for Fraudulent Claims
A contract can be terminated if a fraudulent claim is made and the insurer will not be held responsible for paying out against fake claims. In addition, genuine claims made prior to a fraudulent one must still be covered.
4. Contracting Out
If the insurer decides to ‘contract out’, they must make the insured party aware of any disadvantages that may affect them.
These terms must be clear and unambiguous in defining the effect that contracting out will have on the insured.
In conclusion, both parties on an even footing following these changes. There is more information on the New Insurance Act available.