The new UK Insurance Act comes into force on 17 August 2016. Marine insurers have been told the implementation of the new UK Insurance Act will require a change in their approach to claims handling.
Speaking to the London markets Joint Marine Claims Committee Open Forum in London, Simon Todd, partner with law firm Ince & Co said the new law, which will come into force on 17 August, will require a new way of working for underwriters and claims managers.
The new Act that replaces the 1906 Act contains a fundamental change on the issue of full disclosure of information.
Under the terms of the old act the insured had a duty to declare all information that would affect the risk to the underwriter.
Under the new Act the onus has been placed on the underwriter to seek the information they require to write the risk. There is also an expectation that the underwriter will have a certain degree of knowledge of the risks that a client would face.
Todd said, “In the past if there was a failure to provide full disclosure the cover could be voided and the premiums returned.”
“It was an all or nothing test. This has changed from a duty of disclosure to a duty of fair presentation.”
He added, “It puts greater onus on insurers to obtain information at the placement stage. There is now more expectation on the underwriter to make enquiries to obtain the information they require.”
Todd said this may well mean that the lead time needed to place risks after August will increase and there is expected to be a greater degree of questioning by underwriters of specific areas of the risk given the change in emphasis on information.”
It will also reduce the ability of underwriters to void the claim in the case of a perceived lack of disclosure by the insured.
Todd said that if there is a claim and information subsequently becomes available that would cause an insurer to seek to void a claim and the policy, it will need more than simply the view of the underwriter that had the information been made available by the insured at the time the policy was enacted they would have refused cover or charged a higher premium.
“Underwriters will be required to provide evidence of what they would have done had they been aware of the information that had arisen,” he added. “It will require you to keep more thorough notes of the risks you have declined and the reasons why to prove that you refuse to write such risks and have done so in the past.”