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Biggest changes to British commercial insurance law in over 100 years – know the details!
The Insurance Act 2015, passed by the UK Parliament, introduced the most significant changes to British commercial insurance law in over 100 years. The Act came into force on 12 Aug 2016 and includes Marine Insurance coverage. Here we highlight four key changes that you should be aware of:
- New duties on ‘fair representation’
The insured has a duty to disclose material facts, and the insurer has a duty to ask the right questions to determine the facts in assessing the risk. A representation may be withdrawn or corrected before the contract of insurance is issued.
- Remedies for breach
The insurer has different remedies depending on the situation. If a qualifying breach is deliberate or reckless, the insurer may void the contract and refuse all claims, and need not return any premiums paid. If a qualifying breach is neither deliberate nor reckless, the insurer has the right to void the contract as if they would not have entered into a contract; or the insurer may impose different terms; or may charge a higher premium. When losses are incurred, the insured may not be entitled to full compensation. The claims under the contract may be reduced by the same proportion as the actual premium charged bears to the premium that would have been charged.
- Warranties and terms not relevant to loss
Clauses which could tend to affect either the whole risk or a significant part of the risk remain unchanged. But insurers should pay the claim when the breach of a specific term is totally irrelevant to the loss that has taken place.
- Remedies in the event of fraudulent claims
If a claim is at all tainted by fraud, the policyholder will forfeit the whole claim. If the insurer has already paid a claim and later discovers fraud, the insurer may recover those monies paid to the assured. The insurer may terminate the contract from the date of the fraudulent act.
Naturally, it is very important that you understand these changes and how well you are protected.
Please refer to the UK Insurance Act 2015 for details.