The rules governing the UK's insurance industry were badly in need of reform, as they were old and, in many respects, outdated. Indeed, they created disputes. Following eight years of consultations with businesses and insurers, the Insurance Bill 2014 was published. On 12 February 2015 it passed into law as the Insurance Act 2015. It will come into force in 2016.
Some of the key reforms of the new Act include:
- Disclosure and Misrepresentation: the Act amends the duty on business policyholders to disclose risk information before entering into an insurance contract. The duty will now be of "fair presentation." Insurers are also now under a duty to play a more active role in asking questions of the policy holder.
- Warranties: "basis of the contract" clauses are abolished, which converted pre-contractual information supplied to insurers into warranties. It will not be possible for an insurer to avoid a claim on the basis of the policyholder's breach of a contract term where the breach is shown to be completely irrelevant to the loss suffered by the policyholder.
- Remedies for fraudulent claims: The Act strengthens the remedies available to insurers where a policyholder makes a fraudulent claim.
- Third Parties (Rights Against Insurers) Act 2010: this 2010 Act isn't yet in force (a 1930 Act still applies) but it is intended to make it easier for direct actions by third parties against an insolvent insured. Relevant provisions in the 2015 Act signal that the 2010 Act may come into force this year.
It is hoped that these reforms will provide an up-to-date legal framework for the insurance industry which is fair for both insurers and business policyholders. Although the reforms are extensive, not all of the Law Commissions' policies were implemented and there may be further reform to come in the area of late payment.