On August 12th (this year!) the 2015 Insurance Act came into force, affecting the rules and regulations for how businesses buy insurance and their contract with their broker and insurer.
What is the Insurance Act 2015?
The purpose of the Insurance Act 2015 was to bring British insurance law, developed largely in the 18th, 19th and early 20th centuries, up to date with current commercial practices and therefore fit for purpose. Although passed in 2015, it has only just come into force, allowing businesses time to adjust to the changes. ALL business insurance policies that are placed, amended or renewed from 12th August 2016 are affected.
The Act introduces substantial changes to the laws governing disclosure in non-consumer insurance contracts, warranties and other contractual terms and insurers’ remedies for fraudulent claims.
New disclosure duties in non-consumer insurance contracts
Previously, insured parties were required to 
disclose every circumstance that they knew, or ought to have known, which would influence an insurer in fixing a premium or deciding whether to underwrite a risk. This meant insured parties had to predict, without much guidance, what factors a hypothetical prudent insurer would be influenced by. The same obligation extended to brokers acting on behalf of insured parties.
The Act has created a new ‘duty of fair presentation’ aimed at encouraging active, rather than passive engagement by insurers as well as clarifying and specifying known or presumed to be known matters. The new Act means that before entering into a contract of insurance, insured parties now have to disclose in ‘good faith’ and in a reasonably clear and accessible (relevant) and ‘substantially correct’ manner;
-Every matter which they know, or ought to know, that would influence the judgement of an insurer in deciding whether to insure the risk and on what terms (very similar to the current position); or
– Sufficient information to put an insurer on notice that it needs to make further enquiries about potentially material circumstances
Brokers will also no longer be subject to disclosure duties.
Practical implications from these changes
Insured parties will have to review their 
disclosure processes to ensure that those responsible for procuring insurance disclose all matters they will be presumed to know.
Insurers will not be able to rely on a passive approach to disclosure if seeking to exercise remedies for non-disclosure. Insurers will also have to review what information is readily available to those who decide whether to accept risks and the terms on which to do so.
To bring an action for relief for non-disclosure, insurers will also need to be able to prove how they would have acted differently if the breach had not occurred. In addition a proportionate range of remedies have been introduced depending on the severity of the breach.
Additional important changes resulting from the act govern ‘basis of the contract’ clauses and their previous inclusion in the insurance contract as contractual warranties (often used to discharge a liability), and the setting out of a clear statement of insurers’ remedies for fraudulent claims brought by policy holders.
Implementing the changes – our top tips…
There is now a greater responsibility (and therefore workload) on the part of the business for determining actual and identifying potential risk(s). However, having been notified of any ‘potential’ areas of risk, the Insurer can no-longer take a ‘passive’ approach here with regard to fully evaluating this risk for insurance purposes.
-Those in charge of insuring the business must make sure they have identified and verified all risk(s) involved and present this information to their insurer in a transparent manner.
-It is important to liaise with your insurance broker and insurer themselves, to make sure you’re staying on the right side of the new regulations.
-Ensure you start the process sufficiently in advance before you need to either renew or apply for a new policy.
For further information and advice on the new Insurance Act 2015 – and to make sure you’re on the right side of the rules – you can contact Simon Hammond from Morpheus Insurance on 0800 276 1155 or 01233 712812