Introduction to the Insurance Act 2015

Since the first contracts of Insurance began to be issued over 300 years ago, the legal duty that rests with the Insured has been to disclose to an Insurer all facts that might be relevant to the risk that insurer is accepting. These ‘Material Facts’ have been the a source of many disputes between the policyholder and their Insurer over the years. The new provisions of the Insurance Act 2015 will seek to clarify the position over disclosure with a new set of rules called the Duty of Fair Presentation.

Commercial Policyholders are advised to ensure they fully understand this new Duty if Fair Presentation which in some respects seems to extend the previous requirements for disclosure.

What is the new Duty of Fair Presentation?

An Insured must make a fair presentation of the risk to the insurer. This means that an insured must disclose:

• every material circumstance which the insured knows or ought to know;
• sufficient disclosure to put a prudent insurer on notice that they need to make further enquiries;
  
• the disclosure must be made in a clear and accessible manner;
  
• every representation made in relation to fact must be substantially correct; and
  
• representations in relation to expectation or belief are made in good faith.

data-canvas-width=”233.70491014239627″>Material circumstances include:

• 
  special or unusual facts relating to the risk ;
• the particular concerns which led to the insured seeking insurance for the risk;
• any other fact which those concerned with the particular class of insurance or activity would generally understand as
  being something that should be included within a fair presentation of the risk to the insurer.

The duty of fair presentation:

• is not restricted to information contained in just one document or oral presentation;
• must be substantially correct meaning that an insurer would not consider the difference between what is represented
  and what is correct to be material; and
• can be withdrawn at anytime or corrected prior to entering into the contract of insurance.

Knowledge of the Insured and requirement for sufficient enquiries

The Insurance Act 2015 has also introduced a explanation of knowledge that an Insured needs to pass on to insurers considering the risk. This Knowledge includes actual knowledge, matters which the individual suspected, and information which the individual would have known had they not deliberately refrained from confirming or enquiring about them.

The information an insured ought to know includes information which should reasonably have been revealed by a
reasonable search of information available to the insured. Such information includes information held within the insureds
organisation, or by the insureds agent, or by a person provided with cover under the contract of insurance.

How to comply with the new rules on a Duty of Fair Presentation

Commercial insurance customers should work with their Insurance Brokers to complete an updated pre-renewal questionnaire or Statement of Fact prior to the negotiation of renewal terms. As part of this process commercial insurance customers should take time to consider their risk to insurers and make enquiries within their organisations of any knowledge which Insurers need to be made aware of. A formalised process such as an internal questionnaire would be useful for this purpose. As a Butler Evans customer, we will provide you with suitable documentation to discharge your duty of fair presentation.

If you require any further information on this subject or would like Butler Evans to become your Insurance Broker please do contact us.