The Insurance Act 2015 has introduced the most significant reform to insurance law in over 100 years. The Act impacts all those involved in the insurance sector. In this report we review key markets' response to the Act and outline the practical steps you should have addressed ahead of the Act coming into force.
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The Insurance Act 2015 - are you ready?
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1. Review key markets’ response to the act
Many insurers are choosing to comply with the Act in different ways. Some are simply complying with the
terms of the Act strictly; whereas others are going beyond mere compliance. For example, some markets
have confirmed they won’t apply proportionate remedies but will instead require the policyholder to pay
an additional premium in the event of an unfair presentation of the risk.
In order to advise your clients as to the differences between policies and to make a positive
recommendation, it is essential that you review and understand the differing approaches that are being
taken by key markets. Failing to do so could expose you to potential Errors and Omissions (E&O) claims as
there is a significantly increased risk of recommending a product to a client under circumstances in which a
more suitable product is available but was not recommended.
Our poll results tell us that brokers are not intending to reduce the number of insurers they work with
however, we anticipate the effect of the Act is that most brokers will generally place business with a fewer
number of markets as it will be extremely difficult to keep up to date with the differing approaches of a
large number of insurers..
Most brokers will utilise standard documents, including pre-risk reports, client advices, fact finds and
correspondence. Unless these documents have already been updated, it is likely they will be written to
comply with the existing legal framework. It is essential that brokers review and update their standard
The Insurance Act – are you ready?
The Insurance Act 2015 (‘the Act’) has introduced the most significant reform to insurance law in
over 100 years. The Act will impact upon the practices of all those involved in the insurance sector.
With just a few weeks until the Act comes into force on 12 August 2016, we explore in this note the
key practical steps you should ensure have been addressed before the implementation date.
This report follows on from a live webinar, presented in association with Post magazine on 4 July
The Insurance Act
“Following implementation of the
Act, are you more likely to place
business regularly with more, fewer
or the same number of insurers?”
2. Review and update your standard documentation
documents for all risks incepting or being subject to alteration on or after 12 August 2016. If you fail to do
so, there is a risk that clients will receive advice that doesn’t make reference to some of the new concepts
that have been introduced by the Act, including ‘reasonable search’, ‘senior management’ and ‘fair
presentation’. In the event that a client is subject to a remedy following an unfair presentation, it may be
difficult to respond to a complaint or claim if you cannot point to evidence that you correctly advised your
client of their obligations under the new regime. Equally, the Act introduces new remedies which must
also be drawn to your clients’ attention. It is also necessary to review and update your standard e-mails
and other correspondence, many of which still refer generically to insurers’ right to avoid a policy in the
event of a failure to disclose all material circumstances.
Brokers should also consider updating their internal documents to refer to the new obligations (such as the
fact find documents completed when undertaking meetings and risk reviews with clients) as they can be
used as a risk management tool to prompt brokers to ask the right questions and obtain the information
they require in order to help clients comply with their new obligations.
We are able to guide brokers on the changes required by the Act.
3. Hold conversations with key markets
As set out above, it is important to review the approaches taken by your key markets in order to advise
your clients on their options. We recommend that you hold discussions with insurers to ascertain whether it
is possible to agree the meaning of certain words and terms used in the Act. This is because the Act has
numerous undefined concepts that introduce uncertainty. For example, can you agree the meaning of
‘senior management’ or what is required of a client to comply with their obligation to undertake a
reasonable search? As matters stand, these terms have not yet been tested by caselaw and, as such, they
represent a tangible risk for you and your client. Those risks can be significantly reduced if you can add
certainty by agreeing what they mean before inception of the risk.
Equally, acknowledging that different markets are responding to the Act in different ways, you might
consider asking insurers whether they are prepared to match terms provided by other markets, not just in
terms of premium and breadth of cover, but also in terms of the approach they are taking to the Act. The
extent to which insurers are prepared to be flexible is likely to differ, but those brokers that ask the
question are more likely to receive positive outcomes for their clients.
“Have you reviewed and amended your
standard documentation to reflect the
provisions of the Act?”
As with any new legislation, the changes brought about by the Act represent an increased risk for your
business. One of the biggest risk factors is that it only takes one call or email in which a member of staff
uses the wrong language, to undo all of the good work you may have done in updating all of your
documents and reviewing key markets’ response to the Act. We therefore recommend you put in place a
training programme for all client-facing staff to ensure they understand the new obligations and remedies
and that they are confident in using that language with clients. We also recommend you put in place a
process of auditing, particularly in the first few months post-implementation in order to identify any
weaknesses in your systems and to ensure all staff are providing advice that is compliant with the new Act.
According to our survey, 39% of brokers did not feel that knowledge of the Act had been suitably
disseminated through their business, with a further 21% not being sure. We recommend those firms take
steps before 12 August to ensure all staff have a good working knowledge of the Act.
We are able to provide training to brokers to ensure client
facing staff are prepared following implementation of the
5. Introduce training procedures for claims staff
The introduction of proportionate remedies brings with it added complexity for claims staff as it will be
incumbent upon them to challenge insurers’ assertions about what would have happened in a hypothetical
alternative scenario. Brokers may wish to record underwriting and claims decisions so that, if similar facts
arise on another case, they can refer to previous decisions to challenge any remedy asserted by the
insurer. Brokers should also ensure that all claims staff are aware of other routes to challenge insurers’
decisions, such as the Financial Ombudsman Service (for qualifying policyholders). In the FOS arena, even
though a proportionate remedy may be lawfully imposed under the Act, it is still open for an Ombudsman
to decide that the insurer’s remedy is not fair and reasonable.
Claims staff must also be aware that, for a number of years post-implementation, they will be dealing with
claims that are subject to both pre and post-Act claim remedies both pre and post-Act claims. For long-tail
claims, brokers are likely to be dealing with claims under the existing regime for a number of years. As
time goes on, it would be easy to inadvertently apply the wrong regime to any given claim. Ideally, brokers
will have introduced systems and procedures to reduce the possibility of this occurring.
talk to us…
Tim Johnson | +44 (0)115 976 6557 | tim.johnson@browneJacobson.com
“Are you confident that knowledge of the
key provisions of the Act has been
disseminated throughout your business?”
4. Implement training for all client-facing staff