The Insurance Act 2015 (the IA) is due to come into force on 12 August this year and will make significant changes to the commercial insurance market. For an in-depth briefing on these changes, please see our June 2015 IA publication1.
The British Insurance Brokers Association (BIBA) has commissioned an in-depth guide to the IA in order to help brokers navigate the changes. The BIBA guide is due to be launched and made available to members at the BIBA conference in May.
Three aspects of the IA that warrant special consideration by brokers are as follows:
- The policyholder duty of disclosure must be a “fair presentation” of the risk. For brokers, this will mean the risk investigations and descriptions of the risk must comply with additional guidelines set out in the IA in order to meet the new standard.
- The ability to contract out of certain aspects of the IA must be explained fully to the policyholder. This is necessary both: (a) for the opt-out to be effective; and (b) for the broker to comply with its professional and legal duties and regulatory obligations.
- The IA impacts on the operation of certain policy terms, for example there are different remedies under the IA for breach of a contractual term not relevant to the loss. Brokers should ensure that they understand fully the impact the IA has on their client’s policies in order to ensure they do not misrepresent the policy terms or otherwise provide negligent advice.
The IA applies only to new contracts of insurance entered into on or after 12 August 2016, including any renewals. This means that there will be a transitional period where pre-IA contracts are still in the market. Brokers should also be careful to ensure that any advice in respect of policies that were entered into pre-IA is correct, namely that the pre-IA position continues to apply.