The 2015 Insurance Act explained

When did the Insurance Act come into force?

The Insurance Act 2015 came into force on the 12th of August 2016 and changed the way the law deals with the duty of disclosure for commercial insurance contracts. The purpose of the Act was to update the law to reflect the way in which the insurance market has evolved in modern times with the aim being to achieve a fair and balanced regime between insurers and insureds.

What do I need to do?

Under the Act, insurance contracts are still be based on good faith and you have a duty to make a fair presentation of the risk to insurers which will include disclosure of:
  • Every material circumstance which as an insured you are expected to know or ought to know about the risk for which you are seeking insurance; or
  • Sufficient information to put a prudent insurer on notice that it needs to make further enquiries to reveal those material circumstances.
You must ensure that any information you provide is correct to the best of your knowledge and subject to you having conducted a reasonable search for information. This could require you to obtain or verify information with a number of sources who may hold or have access to important information about your business or the insurance risk.
  • This may include key decision makers or those with responsibility for arranging your insurance (including us as your broker) or other parties that carry out outsourced functions for your business such as (but not limited to):
  • Senior managers and those with accountability for managing functions relevant to the risk
  • Persons covered by the insurance e.g. co insured or sub contractors
  • Persons normally involved in arranging insurance for the organisation
  • Employees who may have in-depth or specialist knowledge on processes and procedures
  • Risk managers
  • Outsource contractors and service providers

What happens if I make a misrepresentation?

In the event that you make a misrepresentation of information which is considered to be deliberate or reckless i.e. you were aware that you were making a misrepresentation or did not care whether or not you were misrepresenting the risk, an insurer will be allowed to avoid your policy, which means that any claims you make will not be met and no refund of the insurance premium will be made. If however you make a misrepresentation of information which is not deliberate or reckless i.e. you appropriately carried out your duty to make a fair presentation but made an honest mistake or omission there are a number of remedies which may be applied by the insurer to achieve a fair outcome as follows:
  • If the insurer can prove that it would not have written the policy at all, the insurer can avoid the policy but must return the premiums paid.
  • If the insurer would have accepted the risk but on different terms, the contract is to be treated as if it included those terms.
  • If the insurer would have entered into the contract but charged a higher premium, the insurer may reduce proportionately the amount to be paid on a claim.

Warranties & Terms

The Act also includes changes to the way that the law deals with insurers rights in the event of breaches of warranties and terms. These changes will affect both commercial and personal insurance contracts. Clauses which have the effect of turning representations made by you into a warranty will be prohibited under the Act. An insurer will no longer be able to avoid a policy where a breach of warranty occurs; instead cover will be suspended for the period that you are in breach of the warranty. This means that where it is possible you may be able to remedy the breach of warranty and continue with the insurance policy; However Insurers will not be responsible for a loss during any period where cover was suspended for a breach of warranty. The insurer cannot avoid a policy or limit or discharge its liability for non-compliance with any terms which are not relevant to the loss or did not increase the risk of loss which has occurred. In order to ensure that you remain fully protected, you must continue to advise us of any warranty on the policy that you cannot comply with. As your insurance broker you can rest assured that we are on hand to help you understand your obligations under the Act and to guide you through the process of gathering the information required to make a fair presentation. We will undertake to present this information to insurers on your behalf in a way which is clear and accessible. An insurer may wish to contract out of certain elements of the Act subject to your understanding and agreement and we will advise you of the implications of this should the situation arise. If you would like to discuss the insurance act or any other related insurance matters, please contact us.
July 11, 2018

What is Directors & Officers insurance?

Imagine this: after years of research and saving you decide to start your own business. Things are a little slow to begin with, but after a few months, it starts to take off. A couple of years later your business is incredibly successful, backed by a team of dedicated, hardworking employees. And then, someone makes a claim against your director and you lose everything because you aren’t protected by Directors’ and Officers’ (D&O) liability insurance. It’s a sobering thought but, unfortunately, it can happen to any business regardless of its size or industry. Generally speaking, claims and legal proceedings can be brought against a director or officer for any decision made or act carried out within the workplace, however innocuous it may seem at the time. Claims aren’t just made by customers; they could come from regulators, shareholders and investors, as well as from employees. There are many reasons for a claim, such as a breach of trust or duty, wrongful trading, neglect, accounting and fraud issues or breaches of health and safety regulations. The director or officer needn’t even be actively involved in the incident; if the court believes they should have known what was happening, they’ll still be held liable for negligence. In order to mitigate risk posed by these claims, businesses have taken out D&O insurance. This insurance provides protection by covering legal costs to help defend claims, and will pay out costs in the event of an unsuccessful defence. Some businesses wrongfully assume that Professional Indemnity (PI) provides full protection of their assets and employees. However, PI merely protects a business when someone makes a claim that they received substandard advice and/or poor service. D&O, on the other hand, protects a business in the event of claims made in relation to how the company has been managed. Let’s use an example. In today’s increasingly-connected world, no business is safe from cyber-attacks. In fact, with so much sensitive data now stored online, the number of cyber-attacks against businesses is on the rise. If you were to suffer a breach, you could potentially find yourself dealing with claims from a number of parties. Customers could claim for compensation after their personal information was compromised, stakeholders could claim for a drop in share value, and business partners could claim for cancelled contracts. On top of these claims, your business could also face criminal and regulatory investigations. If you’re a smaller business you might be wondering if D&O is necessary. However, all businesses are susceptible to risks and compensation claims. In fact, D&O insurance might be even more important for smaller businesses as they often do not have teams in place to ensure best practice. If you are considering acquiring D&O insurance, Sherwin Insurance will be able to find a policy that best suits your business’ needs and requirements.
April 23, 2018

Insurance Premium Tax (IPT) Increase – 1st October 2016

In November 2015 Insurance Premium Tax for general insurance products in the UK was increased to 9.5%. From 1st October 2016 this increased to 10% (remaining at 20% for Travel insurance). As we explained at the time of the last increase in tax, increases are applied by the government and this element of your premium is passed on to them in its entirety.
This change affects all insurers. It is likely that the change will result in an increase in the total premiums paid for insurance this year but we would like to remind you that at Sherwin insurance we have access to a wide range of comprehensive and competitive insurance products, for both the personal and business markets. If you would like to discuss with us the impact of IPT on your insurances or any other aspect of your insurance requirements then please contact us either via the Contact Page or on 01332 372387.
November 18, 2016

IPT Increase

All general insurance products in the UK attract insurance premium tax currently at a rate of 6%. From 1st November 2015 this will increase to 9.5% (remaining at 20% for Travel insurance). We regret that this increase has been applied by the government and would ask you to remember that this portion of your premium is a pure tax and no portion is kept by your insurers or ourselves. This is likely to result in an increase in the total premiums paid for insurance this year. However we would like to remind you that this will affect all insurers and at Sherwin insurance we have access to a wide range of comprehensive and competitive insurance products, for both the personal and business markets.
January 27, 2016

Motor insurance: the secret to smart, safe driving

Motor Insurance has been a legal requirement and an essential part of good motoring for decades now but the way driver approach their motor insurance has begun to change over the past few years. It used to be that drivers looking to insure went straight an insurer to arrange their cover, or perhaps to a broker to help them search the market. While drivers still do this, today online comparison sites are just as popular. It’s easy to see why this is as online comparison sites allow driver to quickly enter their details and receive a number of quotes from different insurers and then choose the cheapest. This is undoubtedly an invaluable tool for motorists to have access to and it makes finding cheap cover far easier than it used to be. Of course, comparison sites aren’t without their drawbacks and one common problem is that while they may help drivers find cheap cover, they aren’t nearly as good at helping drivers find the right cover. What this means is that while drivers may save money on their premiums, they may also be buying cover that doesn’t give them the protection they expect – something they will only realise if they need to make a claim. The reason for this is that most comparison sites are automated and find cover based on a few simple question fields filled in by the applicant. While this can be all many motorists need to find suitable cover, it can also leave may others with cover that doesn’t adequately meet their needs. This is something that is particularly true for people with unusual circumstances – be it a rare or modified vehicle or an atypical driver history. It’s also the case that insurance found on price comparison sites isn’t necessarily the cheapest. Some insurers don’t appear on price comparison sites while many of those that do, have products that are not easily available to the public. This is where an insurance broker such as Sherwin Insurance comes in. An insurance broker will listen carefully to your needs and then search the market for cover that will definitely suit you and give you the level of insurance protection you expect. What’s more, they’ll often have access to exclusive polices, or ones that are unavailable on the open market which means they could save you money or secure you better cover for the same price. As such, it’s always worth talking to your local broker as you never know how they might be able to help you. To find out if we could save you money on your motor insurance, or provide you with a superior level of cover, simply get in touch with our friendly and experienced brokers today.
January 27, 2016

Without employers’ liability insurance your business is at risk

Employers’ liability insurance is a hugely useful insurance that should be considered essential by all businesses for the practical cover it offers alone. But beyond this day-to-day usefulness, employers’ liability insurance is actually a legal requirement and failure to have it in place could result in disaster for your business. Read More
January 27, 2016

Worried about flooding? Here’s our guide to staying afloat

Flooding is a surprisingly common risk faced by business, and one that can be hugely disruptive and expensive, especially if you don’t have adequate flood insurance in place. Though flooding is a risk more commonly associated with seaside or riverside areas, the truth is that it can unexpectedly strike many businesses. In 2013 for example, the UK suffered the wettest Winter on record with Read More
January 27, 2016