The Act came into force on 12 August 2016. The Act replaces the existing duties of disclosure and misrepresentation with a new duty of fair presentation which requires the insured to disclose material circumstances which it knows or ought to know.
Where the duty of fair presentation has been breached, the Act provides a system of proportionate remedies, based on what the insurer would have done had the risk been fairly presented, replacing the existing remedy of avoiding the policy. Where an insured has breached this duty recklessly or deliberately, the insurer remains entitled to avoid the policy.
The Act also abolishes “basis of contract” clauses, which have the effect of converting pre-contractual information supplied to the insurer into warranties and, in the event of breach of warranty, the Act provides that the insurer’s liability is suspended, rather than terminated, therefore, the insurer is liable for claims which arise after a breach of warranty has been remedied.