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The Queen gave her assent to the UK Insurance Act 2015 on 12 February although it will only come into force in August 2016. The Act, which only applies to non-consumer insurances, is intended to deal with three main areas which are perceived to be unfair in a modern world. These three areas concern disclosure and misrepresentation, warranties and remedies for the fraudulent acts of the assured.

Under the new Act the insured is required to make a “fair presentation of the risk” to the insurer. In particular, he is required to disclose every material circumstance which he knows or ought to know or to give the insurer sufficient information to put the insurer on notice that he needs to make further enquiries. The insured is taken to know what is known to its’ senior management or persons responsible for dealing with the insureds’ insurances. The duty of fair presentation also requires the insured not to make misrepresentations.

Under the Marine Insurance Act [1906] the insurers’ remedy in the event of non-disclosure or misrepresentation of the risk prior to inception, was an entitlement to avoid the policy from inception, retaining the premium and refusing to pay any claims. Although this remedy is still available under the new Act, it will only apply if the non-disclosure or misrepresentation was deliberate or reckless. The insurer will also have this remedy if it can show that had it received a fair presentation of the risk it would not have entered into the insurance contract. However, if the insurer can show that it would have entered into the contract but on different terms, the policy may be interpreted as including those different terms; say exclusions or warranties. Similarly, if the insurer can show that had he received a fair presentation, he would have charged a higher premium, any claim may be reduced in the proportion that the premium actually charged bears to the premium that would have been charged.

Under the new Act (Section 10) warranties, still defined as per the Marine Insurance Act [1906], become suspensive conditions. Thus in the event of a breach of warranty the insurer is not entitled to avoid the policy from the date of the breach but rather cover will be suspended at that time and will be reinstated if the breach is remedied or is no longer applicable.

Notwithstanding the above, Section 11 provides that where a warranty relates to a particular type of loss, or the risk of loss at a particular time or location, and does not define the risk as a whole, the insurer will not be able to rely on that non-compliance to escape liability if the insured can show that the breach could not have increased the risk of the loss which actually occurred.

We find the relationship between Sections 10 and 11 to be a little confusing and will be seeking clarification which we will post here.

With regard to fraudulent acts of the insured, the new Act provides that the insurer is not liable for fraudulent claims and may avoid the payment of any claims arising after the fraudulent act but will remain liable for insured losses occurring before the fraudulent act.

The above is only a summary of the main elements of the new Act. For full details of all provisions the new Act should be consulted; copy of which can be downloaded HERE