At midnight tonight the insurers’ faithful servant expires: the last commercial insurance policy based on the Marine Insurance Act 1906 will end and on renewal the Insurance Act 2015 will apply. There may be some wrinkles around contracting out and perhaps a multi-year policy could see some limited application of life support to rare atypical policies but Saturday August 12th 2017 marks the first anniversary of commencement of the Insurance Act 2015. From that point the MIA1906 will start to fade until the last claim has been presented, adjusted and paid. Whilst “full” implementation of the Law Commissions’ extensive programme of Insurance Reform will only be in place on May 4th 2018 (the date which marks the first anniversary of the commencement of the “late payment” term) to all intents and purposes the IA2015 is the only show now in town.
One year ago we concluded a series of blogs anticipating IA commencement with some Elvis themed commentaries based on the lyrics of “A little less conversation”. We do hope that the irony was not lost as the “design” of the new Act was in fact to encourage professionalism and dialogue between insured and policyholder the latter assisted by its broker.
One year ago was also the culmination of a significant amount of preparation by all parties involved in placing an insurance contract – whether underwriter, broker or policyholder and of the various “ops” and “regulatory” teams in many businesses.
Yet, one year ago, there did remain, even amongst the best prepared an anxiety about the new regime about to commence though the experience today, after 364 days, is of a relative calm. Duty of Fair presentation? A cinch! Reasonable search? Not so hard! Proportionate remedies? Just do the deal! Contracting out? Concentrate! Basis clauses? Just delete! Warranties? Re-word! Irrelevant terms? Move on! Glib? Certainly – those words do not reflect the huge amount of work and thought that went in to the implementation phase more than a year ago. The work or the LMA and BIBA and many others in the sector will stand the test of time and will form the basis on which expert evidence will be based when some cases are tested in argument before the Courts.
And now, one year on, we have the calm after the storm. It is quiet on coverage issues that arise from the reforms. There will, however, in time, be disputes as novel issues arise that test new areas of law. We have hazarded a guess of “The first issues to be decided” in an earlier blog (click the link) but the reality is that this is speculative. What does seem remarkable, as we now blog on the first anniversary of commencement, is the absence of issues. It is quite understandable for reputational reasons that there is a marked reluctance to be the first to test the new Act but it may be that the calm after the storm is due to the fact that the new law does reflect market best practice; that there has been a levelling up of standards and that the “professionalism” agenda that underpinned the change in the law has meant that all parties to the insurance contract have upped their game; that a better description of risk now matches the risk appetite of the underwriter.
Certainly, anecdotally we can point to a number of conversations that evidence improvements on all sides to the placement process though we can also bear witness to the continuation of the rogue (and ineffective) basis clause here and there! However it is certainly the case that it remains too soon to make any judgment on the success of the Insurance Act and a soft market is less likely to test the law and the technical quality of wordings. A tentative conclusion is probably: not bad, no obvious problems, certainly no “show stoppers” and a cautious so far so good. Certainly there is no room for any complacency. A BIBA survey earlier this year did reflect considerable concerns about the E+O risks facing brokers that arose from advising on the new law. Underwriters too need to remain vigilant as the law does develop and ensure that policy wordings change as necessary and form a coherent product for the policyholder. Subject to those caveats and assuming that “so far so good” is a valid, albeit tentative conclusion then a wider lesson might be drawn: engage, discuss and do rely upon the experience of market experts to implement “best practice” because ultimately it is the optimal outcome for the purchaser and the market itself.