This guide includes important information on changes affecting commercial insurance Policies- please read this carefully.

You and the insurance Act 2015.

After 12 August 2016, the Insurance Act 2015 will come into effect. This will affect commercial insurance policies subject to the laws of England, Wales, Scotland, or Northern Ireland that are taken out, renewed and/ or altered after that date. It is the biggest reform to the insurance law since the Marine Insurance Act of 1906 and modernises how insurers approach commercial insurance policies and clarifies what information you, the client is required to provide to your insurer.

Purpose of this Guide.

This guide aims to tell you about the key changes and how they will affect you, it is not intended to advise you on your legal rights and obligations but hopefully will provide a good background to inform.

We are here to help.

The act places a revised duty on you, the insured, to make a fair presentation of the risk to insurers by disclosing every material circumstance that you know or ought to have known following a reasonable search.

In addition, the Act requires all risk information to be presented a clear and accessible manner. This aims to avoid any so- called “data-dumping” and required that known concerns or unusual risk factors are adequately highlighted.

Providing us with as much information about your business, its operations and the risk controls you have in place, in clear a manner as possible, will allow us to use our market knowledge to obtain the most suitable insurance terms and relevant cover for your business.

Mid-term Adjustments, changes to the business and the risk features.

You need to keep your insurers informed of any changes to your business and its operations during the period of insurance. This could include, but wont be limited to, drivers with motoring convictions, employees/employers with criminal charges or convictions, HSE Investigations, acquisitions, changes to manufacturing processes and minor incidents that did not result in an insurance claim.

You should also let us know in advance if you increase or change the security used to protect your property and either stop any existing or adapt any further risk management programmes.

At renewal, you have the same duty of disclosure as when you first took out the insurance, and you must tell us of any actual or proposed changes to the business that may influence how an insurer views your business and consider the necessary enquiries set out earlier in this document.

Although we will have asked specific questions about your business operation originally, this does not replace the need for you to carry out another reasonable search which it comes to renewing a policy.

Failure to disclose

Under the current law, where a person or a company that is claiming insurance is found to have breached its duty of disclosure, the insurer has the right to avoid the contract.

Under the Act, where an insured person or company is found to have breached its duty of fair presentation, the insurer now has a number proportionate remedies available (unless these are further amended by the policy itself).

Warranties

Under the law applying to insurance placed before the 12th August 2016, should you breach a warranty noted under a policy., an insurer is automatically discharged from any liability, regardless of whether the break was related to the loss or not, ie they will not have to pay any claim.

LMB Risk Management is a Trading Style of LMB Insurance Services Ltd LMB Insurance Services Ltd is Authorised & Regulated by the Financial Conduct Authority FRN Reference: 799352. A registered company in England & Wales. Company Number: 11030040. Registered Office: 66 Faraday Mill Business Park, Cattedown, Plymouth, PL4 0ST.

The new act allows insurers to suspend cover where there has been a breach of warranty, rather than discharge their liability altogether, ie if something you originally disclosed or agreed to do turns out to be false or not done, the insurer will not pay out for any claim you may make, however, under the new Act cover is reinstated as and when the breach has been rectified.

In addition, where the warranties are designed to reduce a specific risk of loss and these warranties are breached, the insurer will only be able to refused cover if the warranty was relevant to the loss that occurred, However it is up to the insured to show the th breach of warranty could not have increase the risk of loss that occurred in the circumstances in which it occurred.

However, you should be wary that this additional protection does not apply to any warranties or other policy conditions which “define” the entire risk. Such as the minimum or maximum age of a driver. It also does not apply to policy conditions relating to requirements following a loss, such as notification.

Contracting out of the Act

Although insurers do have the option too opt out of most part of the Act, they are obliged to take sufficient steps to draw attention to any “disadvantageous terms” before you take out the contract or insurance. Note that insured do not need to specifically identify such items as deviating from the Act, provided they are clearly explained.

Summary

We hope you find this guide useful, however in any circumstance where you are unsure, please talk to us so that we can assist with your understanding. We will of course help you through the process and guide you through the fact-finding process to ensure that you are offered insurance that is both competitive and covers your business.

Glossary of Terms

Breach of Warranty – A warranty is an undertaking by an insured person or company that a statement is true or a condition to be fulfilled. If the statement turns out to be false or the condition is nor fulfilled, the warranty is said to have been breached.

Data Dumping – The presentation of information in a manner which is unstructured and without adequate signposting to the important aspects.

Fair Presentation – The disclosure of every material circumstance which the insured knows or ought to have known after they have performed a reasonable search.

Knows or ought to have known – This is the information you should know about the business’ operation and personnel or ought to have known following a reasonable search.

Material Circumstance – A circumstance is material if it would influence the judgement of a prudent insurer in fixing the premium and/ or terms of the insurance in determining whether to accept the risk. This refers to any prudent insurer and not just to the insurer who has been offered the risk.

Reasonable Search – The Act states that a reasonable search should include a search being made of the information available to the insured’s organisation or “held by any other person (such as the insureds agent or a person for whom cover is provided by the contract of insurance)”.

Senior Management – Those individuals who play significant roles in the making of decisions about how the insured’s activities are to be managed or organised.