Advantage Talk - Insurance Act

1. EXPERT ADVICE. WAY ABOVE THE ORDINARY. The Insurance Act 2015 Are you ready? New Disclosure Obligations If you weren’t already aware, The Insurance Act comes into effect on 12 August 2016. Which means that anyone who has responsibility for sourcing insurance needs to be taking action - now. Before a new policy is started, if your policy is due for renewal, and whenever there is a material change in risk, it’s your responsibility to make a clear and accessible disclosure of all material facts. The Act has many positive outcomes for policyholders which is great news. For example, insurers will no longer be able to automatically void cover following a breach of warranty. In other words, those which would influence the judgement of an insurer.So this means that before making this disclosure, you’re required to make reasonable enquiries of your staff; ensuring that you’re aware of all circumstances and facts that could be deemed to be relevant material facts. However, you’ll also need to be aware that the Act imposes new and clear disclosure obligations on policyholders that must be taken seriously. Advantage Risk Solutions Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Firm reference number 629688. www.advantageuk.net ISSUE 01 March 2016

2. What needs to be disclosed Steps to ensure you make a complete disclosure All material circumstances that are known, or ought reasonably to be known to you. This may include circumstances that prompted a specific cover to be requested, potential financial difficulties and anything that might increase the risk of a claim. Insurers are not expected to be experts in your particular industry, so don’t assume anything is common knowledge. 1. Create a clear questionnaire or circular for your staff to identify issues. 2. If in doubt about whether something should be disclosed - disclose it! 3. Circulate the questionnaire or circular - well in advance of your renewal date. For a small business, the managing director may well have the sufficient day to day operational knowledge to confidently make the disclosure. 4. Diarise to ensure key individuals have responded with details of any material facts. However, if you employ more than a handful of staff, or if you’ve delegated important duties and decisions, it’s crucial that a full enquiry is made of these staff before you can confidently make your disclosure. 5. Clearly document all responses. 6. Ensure you make your broker aware of all material facts arising. And if your broker has not prompted a full disclosure, it’s time to change your broker. What are the Risks of non disclosing? 7. Make sure that you see the submission that’s prepared by your broker and are given the opportunity to clarify or amend as necessary. In the event of a failure to disclose a material fact, an insurer will have various options: 8. Be prepared to give further information in response to any insurer questions. 1. If the non disclosure is deliberate or reckless, the policy can be avoided and your premium retained. 2. In the event of a careless breach, your policy can be avoided and your premium refunded. Plus terms can be applied retrospectively or the claim reduced to reflect the fact that the insufficient premium has been charged. For more information, let’s talk 01256 483969 Any of these remedies have the potential to have disastrous consequences for your business. It might have been better to self insure – at least you know where you stand. Any views or opinions expressed in this briefing are for guidance only and are not intended as a substitute for appropriate professional guidance. We have taken all reasonable steps to ensure the information contained herein is accurate at the time of writing but it should not be regarded as a complete or authoritative statement of law. Advantage Risk Solutions Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Firm reference number 629688. www.advantageuk.net ISSUE 01 March 2016