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04/08/2016   Insurance Act 2015

Insurance Act 2015

Introducing fairer contract terms


The Insurance Act 2015 (the Act) comes into effect 12th August 2016 and is intended to create a fairer contract between policyholder and insurer, by imposing new duties for all parties involved in the arrangement of your insurance policies, including you the policyholder.

The Act sets out the principles to be followed so that it can apply equally for small businesses right up to the largest corporations.

Key changes to current business practices will impact policyholders, insurers and insurance brokers in the following areas:

·         Fair Presentation of Risk 

The new duty to make a Fair Presentation of Risk is one of the most fundamental changes brought about by the Act. Whilst the general requirement to disclose facts ‘that are material to the prudent insurer’ has not changed, the Act sets out in more detail the type of information that needs to be disclosed, who needs to disclose it and how it needs to be disclosed. The intention is that the customer and their broker disclose all relevant information before the insurance contract or any change in cover commences. Both the insurer and the insured are encouraged to make sure that they are clear as to what information the insurance contract will be based on.

·      Remedies (for Non-Disclosure or Misrepresentation)

The Act introduces a new approach in this area, providing proportionate remedies where fair presentation has been breached, and abolishing policy avoidance for a breach of the "Duty of Utmost Good Faith".

·      Warranties and Conditions

Currently an insurer may avoid liability to pay a claim under a policy if there has been a breach of a warranty, even if that warranty is later complied with, or if it is completely unrelated to the cause of the loss. Under the Act, all warranties will become "substantive conditions" which means that cover is  only suspended during the period of noncompliance with the warranty.

It means that insurers   will therefore be responsible for any losses incurred after the breach of warranty has been remedied. Also if the compliance with the warranty would not have prevented the loss taking place, then the insurer cannot avoid liability for the claim.

·      Fraudulent Claims

The Act clarifies the remedies available to an insurer if a fraudulent claim is made.

·      Contracting Out

The Act provides for parties of an insurance contract to agree to contract terms which are less favourable than those stipulated in the Act, provided the insurer satisfies two transparency requirements:

o    To draw the insured's attention to any disadvantageous term before the contract is entered into

o    That the disadvantageous term is clear and unambiguous as to its effect


The Act replaces the longstanding "Duty of Disclosure" which required a policyholder to disclose risk information to insurers before entering into an insurance contract, with a "Duty of Fair Presentation".

How will this affect you and your relationship with GJIS Ltd?

Fair Presentation of Risk

Because GJIS have always had an eye for detail in our dealings we do not anticipate any changes.  Our discipline and practise has always been one of knowing our client and understanding their business. In fact, for years, we have summarised all the information about your business and based on these have advised you how best to insure according to your attitude to risk.

All you need to do is to agree that these summaries are a fair representation of your business … or tell us where there are inaccuracies.

Remedies, Warranties and Fraudulent Claims

In our experience an Insurer will treat their policyholder fairly when there has been a genuine error or misunderstanding so in practice proportionate settlement is nothing new. Formalisation removes the element of uncertainty and the ‘status quo’ that all statements about your business are accurate remains.

Contracting Out

Our main line insurers will not be ‘Contracting Out’ and therefore the default stance will be that any policy we arrange will be covered under the terms of the Act. As agents that specialise in arranging insurance for jewellers there is always the possibility that an Insurer may wish to ‘contract out’ or apply special restrictions. Should this be the case you will be advised of any shortcomings in protection, thus satisfying the ‘transparency’ requirements.

To read more about the Insurance Act 2015 please click here.



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