The Insurance Act: what you need to know


The last Insurance Act was passed in 1906; arguably a simpler time and certainly one with very different requirements. With this in mind, the latest law has been welcomed by many as a long overdue farewell to the “draconian” measures of the past.  In fact, this law is a decade in the making and involved reviewing a century’s worth of insurance claims to precisely identify the needs of 21st century businesses. The changes recommended were codified before receiving Royal Assent in February 2015, and will finally come into force in August of this year. The government hopes the changes will increase transparency, reduce the number of legal disputes and better equip British insurers to compete in the global market. It is hoped that businesses will benefit from around £100 million over the next decade thanks to a lower level of litigation and transactions costs.

But what do all these changes actually mean for the modern business? And how it will affect the relationship between insurance companies and businesses? At Churchill insurance Consultants, we appreciate our clients may not want to scour through recent legislation, so we have broken down the legal documents into some helpful subcategories to help you understand how the new Act works and what it means to you.

Insurance Act

–          Duty of fair representation

The only part of the law that imposes requirements on the businesses; it states that policyholders are responsible for presenting accurate information. If they are found to have submitted incorrect information it allows the insurance companies to void any contracts.

–          Knowledge of the insured and insurer

This section was introduced to ensure that when both sides sign a contract, they are armed with the right level of knowledge. An insurer is assumed to have information that could easily be uncovered in a basic search, as well as an overall understanding of the Proposer’s activities. Similarly, there will be an onus on businesses to ensure senior management take responsibility for Insurance arrangements.

–          Remedies for breach of fair representation

This changes the way brokers deal with insurance claims, where there has been an accidental breach due to misinformation. Before, insurers could legally void the contract, whereas the new law only allows this in cases where an insurer would not have provided policy cover at all. According to the new law, insurers must now respond proportionately. For example, if the premiums may have been higher an insurer can lower the cover to compensate.

–          Warranties

The adjustment to warranties is perhaps the most significant change in insurance law and one that serves to empower business owners. The new law states that any breaches of warranty that did not have an impact upon the loss cannot invalidate the contract. Not only that, but any breach in contract means that insurer’s liability is suspended rather than completely broken. This allows for a far more flexible and lenient approach in regards to insurance cover and should provide some well needed breathing space for businesses up and down the country.


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