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The Insurance Act: What does it mean for you?

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On 12 August 2016 the Insurance Act came into effect, heralding the most significant change to UK insurance for many years. The Act aims to modernise commercial insurance and has implications for insurers, brokers and the insured. The Act’s key points

  • The insured must now present the insurer with a ‘Fair Presentation of Risk’. This means the insured must undertake a ‘reasonable search’ of their business and give the insurer a clear and well-signposted presentation.
  • If the insured makes a claim and did not make a fair presentation of risk but this wasn’t deliberate or reckless, then a Proportionate Remedy will apply provided the insurer would have offered a quote, otherwise the policy could be cancelled from inception, the claim repudiated and premiums be returned. If the insurer would still have offered the insurance based on the new information, but additional terms would apply, insurers have the options of reducing any claim payment in line with the premium they would have charged or retrospectively applying of any restrictions in cover. However, if a failure of fair presentation was deliberate or reckless, the insurer can cancel the insurance from inception, repudiate claims and retain premiums.
  • Abolition of Basis of Contract Clauses – prior to the Act, any statements on a policy proposal form would automatically turn in to warranties in a policy. This is now abolished.