Commercial insurance legislation
THE biggest change to insurance legislation in over 100 years came into force on August 12.
The legislation aims to create a new and fairer balance between policyholder and insurer as well as raise professional standards when insurance is placed.
But what will the changes mean to businesses?
There will be a new and explicit duty to ask questions of the whole business not just senior staff and prior to the renewal of policies.
The level of questioning and information gathering to prepare renewals may increase depending on the size and nature of the business.
Policyholders will have to ask anyone benefiting from cover whether they know any material information in relation to the risk.
In the event that key material information is not provided to the insurer and is later discovered, the insurer can add in new exclusions or sub limits that apply from the inception of any policy.
Insurers could also apply proportionate payments during the claims process if the risk would have attracted a larger premium had they been in receipt of the material information at inception.
Other implications of the changes:
Insurers will lose their historic rights to repudiate claims for breaches of conditions irrelevant to the loss suffered
Underwriters will need to allocate more time to review each submission and consider the risk
All presentations (of a client’s insurance risks) must be reasonably clear and accessible to the insurer, which means that simply providing a link to a website or sending lots of data in an unstructured format will not meet the new legislation standards. The Act specifically excludes ‘data dumping’.
It is still early days to get to grips with many of the amendment s-whichmay seem complicated and difficult to follow.
Risk profiles are different for all sorts of commercial business insurance policies and some elements of the new legislation will be more relevant than others.
The best advice is to discuss the implications of any changes to insurance legislation with your broker before policy renewals.