Insurance Act: What is means for businesses
What the introduction of the Insurance Act means for businesses
The Insurance Act is a piece of legislation that takes effect in August that aims to update and modernise the regulatory framework which Britain's insurance industry operates in. It replaced the Marine Insurance Act of 1906. The purpose of the act is to increase transparency and fairness within the industry, allowing for claims to be settled with a lower number of legal disputes.
Having a Broker businesses can rely on is important to ensure a smooth transition with the introduction of the new Act. Abaco has highlighted three key areas of the reforms and how they may affect businesses:
1. Disclosure, Misrepresentation & Material Facts
The Act places firm responsibility on business owners to fully disclose all risks and suspected risks associated wth their business before agreeing an insurance contract. This is based on the concept of fair representation that allows the insurer to make an informed and accurate assessment and minimise ambiguity. In the event of a failure to fully disclose all relevant facts pertinant to cover, the insurer has the facility to cancel the policy ab initio, refuse all claims and seek damages above the premium paid.
The Act has abolished the 'basis of contract' clauses, which has the effect of transforming pre-contractual information supplied to insurers into a warranty. A breach of a warranty leads to the insurer being relieved of their duty to pay in the event of a claim. If a warranty has been breached, but the business owner can prove it did not increase the risk of a loss, then cover can be reinstated.
3. Remedying Fraudulet Claims
In the event a business submits a claim found to be fraudulent, the insurer has the option to terminate the contract and any funds already distributed to the insured in connection to the claim would be obligated to turn to the insurer. However, the insurer would remain liable for genuine loss that the business experienced prior to the fraudulant claim.
For more information on how the introduction of the Act could affect your cover, contact one of our advisors on 0116 281 5960.
The Abaco Team