11 September 2016
The UK Insurance Act 2015 comes into force on 12 August 2016. The purpose of the Act is to promote fairness between an insurer and its policyholders. By way of example, the Act sets out what is expected of policyholders when disclosing information at the insurance proposal stage and limits insurers' ability to decline policyholders' claims that have been properly brought.
Other than in respect of some mandatory requirements contained in the Act, business insurers whose policies are subject to English law are entitled to determine the extent to which they wish to adopt the Act. Through our mutual ethos and commitment to service Sunderland Marine has always aimed to treat policyholders fairly, so we support the spirit of the Act and will be adopting its provisions in full.
Summary of key changes introduced by our adoption of the Act
• Removal of basis of contract' wording in the proposal form which converts the information you provide at proposal stage into a warranty. However, as summarised below you are still required to ensure that you provide us with a fair presentation of the risk you are asking us to insure.
• Inclusion of a more detailed duty of fair presentation, which requires you to undertake a reasonable search of available information and make reasonably clear and accessible disclosures of any matters that might influence an insurer's decision about whether to accept a risk and/or the insurance policy terms to offer. Please note that commercial policyholders are required to make reasonable enquiries of their senior management, or other employees responsible for placing insurance, to ensure all relevant information concerning your policy is presented to us. Note that we may ask you to provide additional information, or information in a different form, if we feel we need to. This is designed to ensure that we have access to all relevant information concerning the risks to be insured by us.
• Changes to what insurers can do if a policyholder does not make a fair presentation of the risk. Depending upon whether the failure to do so was deliberate or reckless, and what (if any) terms we would have offered if accurate disclosure had been made, insurers may be entitled to avoid a claim or proportionally reduce the claim amount.
• Changes to what insurers can do if a policyholder breaches a policy warranty which is intended to reduce the risk of a loss of a particular type occurring. If you breach this type of policy warranty and then make a claim, your warranty breach must have increased the risk of a loss occurring and must not have been remedied at the time of the loss for us to be entitled to consider declining your claim. Note that depending on the other terms of your policy there may still be occasions where we could have the right to decline your claim.
• Removal of the utmost good faith' principle, which means that it will no longer be possible for insurers who have adopted the Act to decline a claim solely on the basis that an insured has breached the duty of utmost good faith; and
• Fraudulent claims: insurers are expressly permitted to cancel insurance policies with effect from when the fraud took place. Insurers are not required to pay any claims arising after the date of the fraud, or to refund premium in the event of a fraud occurring.
What you need to do when applying for a new policy or a renewal
• Be aware of the need to make a fair presentation' by providing requested information in a reasonably clear and accessible format. Completing our proposal form as fully as you can helps make sure you meet this requirement.
• If you are an organisation, ask all senior managers and/or employees who are responsible for placing insurance whether they are aware of any relevant information.
Changes to how your policy will work
Our approach has always been to treat our policyholders as fairly as possible, so it is unlikely that you will experience many changes to how your policy operates in practice. However, although our approach to warranty breaches has not significantly changed it is still important to be aware of and comply with the warranties in your policy.
If you have any questions about the Act, your usual contact at Sunderland Marine will be happy to assist.
Sunderland Marine Insurance Company Limited