Insurance brokers are being urged to prepare now for the biggest shake-up to the laws surrounding commercial insurance in over a century, with the agreed changes in the upcoming Insurance Act due to come into effect in the autumn of 2016; just one underwriting cycle away.
Next year’s update to the Marine Insurance Act of 1906, which forms the contractual basis of UK insurance law, will focus on changes in the commercial insurance sector specifically centred on disclosure, the effects of breaches of warranties, and insurers’ countermeasures against fraudulent claims. Said to reflect the needs of today’s modern business relationships, these changes could have a dramatic effect on your bottom line.
Many insurance brokers are confident that the changes brought forward in the Insurance Act will demand of them merely an authoritative role, as they’re tasked with explaining these changes to their clients (the bulk of the changes will fall on the insurers themselves).
Nevertheless, brokers are being encouraged to prepare for these upcoming changes as soon as possible. From reviewing the wording of policy documents to updating customer databases and computer systems, brokers should be aware of the amount of preparation they’ll need ahead of the Insurance Act’s implementation.
The Act will make big changes for insurers; especially when it comes to warranties. From next year insurers will find themselves having to pay out for claims that they previously could have avoided paying had there been a warranty breach on the part of the insured (even if that breach was unrelated to the loss).
Changes for insurance brokers
The main change that insurance brokers can expect to implement is that they will now have to explain to their clients how the legal basis of insurance has transformed and offer guidance to clients on what (and how) to disclose to insurers in light of the introduction of the Act.
Brokers are therefore advised to keep records of the clients they have spoken to, the advice they have given and the relevant policy details.
David Hertzell, who works as a consultant at legal firm BLM, is confident that though these changes could create a slight but immediate increase in risk for insurance brokers, the Insurance Act also provides brokers with an opportunity to add value:
“The broker usually has information that the policyholder doesn’t and will have an obligation to disclose more information and to be a more active participant in the process. Brokers are informed intermediaries and should provide advice to policyholders, and this means they also have an opportunity to add extra value to the transaction.”
The value-adding opportunities include the authority that brokers will be able to give insurers who choose to act within the terms of the bill immediately, rather than waiting until it becomes a necessity. Neil Campling, CEO of ICB Group, commented, “It adds value to have a better degree of certainty. A number of insurers have been practising this anyway, but this codifies what they are doing. Once the bill goes through, all insurers will fall into line.”
With the upcoming changes in the Insurance Act having been developed by the Law Commission after an 18-month referral, it’s clear that next year’s update to the original Act of 1906 (which was itself based on eighteenth and nineteenth-century case law) is as necessary as its age would suggest.
Insurance brokers looking for expert advice on how they should prepare for the new Insurance Act should contact Stride Underwriting for a consultation. Our range of quality cover and high standards of communication and service put us in the ideal position to help you.
Advice and support
If you have any further queries regarding compliance, the Insurance Act 2015 and your duties as an insurance broker, please contact us on 023 9224 8790 or email us here. As always, Stride Underwriting brokers have direct access to their account manager and our senior underwriters, who will be more than happy to answer any questions you have.