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The Insurance Act

The principles of the Insurance Act introduce a necessary modern framework to our industry for the benefit of our SME customers. Here's what you need to know to be prepared for this August.

The implementation of the Insurance Act is just the start – we’re fully behind firmly embedding it with you and your clients. Make the most of the Act’s opportunities with this clear and meaningful support.

The BIBA Insurance Act Implementation Guide

Download these useful guides from BIBA. They highlight what you need to know for August.

BIBA interviewed a handful of industry experts during the BIBA 2016 conference. Watch the short video below.

 Cathy Taylor, Head of Commercial Underwriting and Operations at Ageas talks through the Act's impact on SMEs.

Here are some of your frequently asked questions: 

1. Will you accept online proposals as a ‘fair presentation of risk’?  

For business placed via Digital platforms, where question sets are answered fully and correctly, then we will deem that to be a fair presentation of risk for such business.

If answers provided on such platforms are not completed, correctly or truthfully, then consideration as to whether deliberate or reckless provision of detail has occurred will be applied. This could result in voidance of policy cover. 

2. Do you have a set of questions to collect risk information?  

We do not provide standard questions for our manually traded business. Question sets are in place for digitally traded business via our online platform and where our products are available through software houses. 

3. What are you defining as a ‘reasonable search’?  

We are not defining this any further than the Act itself does. There is no ‘one size fits all’ answer to this, as what counts as reasonable is intended to be flexible and will be determined by the size and complexity of the business. The insured must take reasonable steps to ensure that it extends to any other person who may hold material information.

This could apply to information held by the broker, other agents (e.g. advisers, outsourced service providers) and even (if reasonable) other third parties.

Taken from the Act Explanatory notes published by the government:

Clause 4(6) defines what an insured ‘ought to know’ by reference to information that could reasonably be expected to be revealed by a reasonable search of available information. It largely codifies principles derived from some case law, namely that insureds should seek out information about their business by undertaking a reasonable search, which may include making enquiries of their staff and agents (such as their insurance broker).

Clause 4(7) makes clear that relevant information subject to the reasonable search may be held by persons other than the insured itself. Taken together with clause 4(6), this means that the reasonable search may extend beyond the insured itself to other persons, where such a search would be reasonable in the circumstances and where information is available the insured. The scope of the phrase ‘information held ... by any other person’ in this context is intended to be flexible. 

4. Who are you defining as ‘senior management’?  

We are not defining this any further than the Act itself does. The Act defines senior management as anyone playing a significant role in the making of decisions about how the insured’s business activities are to be managed or organised. The Act does not include a precise definition as there will be a wide range of businesses purchasing insurance under this law. 

5. Will you provide survey reports to an insured or their broker?  

Providing survey reports, that we have completed (or commissioned), to an insured or broker is not something we currently do and we do not intend to change approach in response to the Insurance Act.

A survey report will note observations of the risk that the surveyor is able to make on the day of the visit. This includes information gleaned directly from the insured from discussions. As this information is already known to the insured they would be in a position to know this and provide the information as part of their fair presentation of risk.

6. Are you making changes to policy wording?  

Some of our wordings have already been updated with changes for the Insurance Act. Others are in the process of being amended and rolled out during the second quarter of this year. In some cases that will mean complete new wordings, where these were due to be reissued. In other cases the change will be made by a Notice to Policyholders.

We will be notifying brokers as each set of product documentation is updated. 

7. Will you issue Notice to Policyholders outlining your approach to the Act?  

We will issue notice to policyholders (NTP) for new business and renewals as we make changes to products, rather than for all policies at a set time. This has been a rolling process since last year and will continue throughout 2016 and the NTP will focus on the wording and document changes, not just on the Insurance Act.

We will do other external communications in 2016 explaining what the Act will mean to broke and any specific process changes that they need to be aware of. 

8. Is the Act amending how you handle DUA arrangements?  

Impacts are the same as for our own Underwriting processes and documentation. Focus is on ensuring documents support the changes, and guides are up-to-date and each cover holder is well versed in the obligations from the act.

There is a need to ensure Delegated Authority coverholders are training their underwriting and claims handlers to have a good working knowledge of the principles of the act.

They are also required to support best practice on:

  • clear underwriting guidelines
  • clear documented underwriting decisions
  • investigating risk details with brokers where full detail may have not been presented
  • investigating risk details of coverholders that could be material to understanding risks acceptance, pricing and terms. 

9. What are you doing with wordings that you do not own?  

Policy wording and associated document amendments will be completed by Ageas for Scheme products where those documents are owned by Ageas.

For wordings owned by the broker, any changes resulting from the Insurance Act will need to be signed off by Ageas as per the normally agreed processes on wording and document changes.

10. Will you adopt any Act provisions before August 2016?  

An external communication was issued last year regarding early adoption of proportionate remedies. We have also already updated a number of our wordings and have a rolling programme of wording and notice to policyholder updates in place. 

11. Will TOBAs be re-negotiated in light of the introduction of the Act?  

We have no plans to amend TOBAs as a result of the Act.

12. Are you planning to ‘contract out’?  

We are not contracting out on any of our core non scheme products at the present time and have no current plans to contract out on our schemes. These are, however, bespoke and constantly under review.

13 What changes have you already made?  

Policy Wordings

A number of policy wordings have been updated already. There is a rolling programme to complete the rest in Quarter 2 2016. A number will be changed by means of a notice to policyholder document, and then incorporated as wider review work is completed with each wording.

Claims Handling

Where it is beneficial to the customer, we have been handling all new claims from 1 October 2015 (and any policies incepting or renewing after that date) as if they had been written under the Act.

14. Who should I speak to if I have any questions about the Act?  

Any questions on the Insurance Act should be addressed to your usual Broker Account Executive and where these can’t be answered, they will refer to the central project team. 

Contact them here