The Insurance Act received Royal Assent by Parliament on 12th February 2015, and will come into force on 12th August 2016. This represents the most significant reform of UK insurance law since the Marine Insurance Act of 1906. All contracts of insurance, reinsurance and retrocession made after 12th August 2016 (or variations to contracts which are made after 12th August 2016) will be governed by the Act.
The Act is the product of a process of law reform which was instigated by the Law Commissions in 2006. The Act is intended materially to change the way in which insurance business is conducted, and is designed to modernise and clarify the law.
To the "casual observer" it might be surprising that the UK's insurance law regime has for so long been based on a statute that is more than 100 years old and which was originally designed only to address marine insurance. And yet, the business of insurance in the UK has thrived and the UK legal system, based upon a combination of statutory codification and judicial precedent, has, to a significant extent, shaped the international insurance markets and the development of insurance law during the century since the 1906 Act. But as market practices have developed the legal regime needed to be updated to reflect changing demands and bring it into line with other jurisdictions.
With the enactment date now looming, it is important to focus on how the Act will work and the steps that insurers will need to take to ensure they are ready to deal with these changes. In this guide we have focused on how the key provisions of the Act will operate, offering guidance on best practice for insurers as they implement the provisions
of the Act, and assessing the practical implications of the Act across all lines of insurance business. Some of the more controversial provisions of the Act, such as the removal of the basis of contract clauses, have already been widely implemented by the market, other provisions have gradually been introduced by insurers as they have sought to ready themselves for the Act. Nevertheless, it is important to note that all contracts of insurance after 12th August 2016 will be formed under a new regime and insurers must take careful note as they are drafting contracts of the potential implications of the Act.
During the process of law reform, the Law Commissions looked at other jurisdictions where similar provisions had already been implemented, and in part eight of this report we have considered how the new UK regime for insurance law measures up against the other major insurance markets.
Like all new statutes, the full impact of the Act will not be appreciated until some of the provisions are interpreted by judicial precedent, and we expect that over the coming years we will see further definition of the Act as it is put into practice.
We hope that this report will add valuable insight for insurers as they move into the new regime.
In practice how to comply with the Act
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