Take advantage of Insurance Act now: Airmic releases sample endorsement
Airmic has published a technical briefing paper designed to help members benefit from some of the changes in the 2015 Insurance Act before it comes into force. The new law was passed in February and represents fundamental reform of the laws governing commercial insurance, including crucial safeguards for policyholders. However, without changing current policy wordings, insurance buyers won’t see the benefits until August next year.
The paper, written with law firm Herbert Smith Freehills, provides policyholders with a series of sample wordings, or endorsements, to help members amend their existing terms of a policy to replicate some of the core reforms of the new Act.
The endorsements cover some of the most important elements of the Insurance Act, including the clauses relating to basis clauses, breach of warranty, breach of terms unrelated to the actual loss, and remedies for non-disclosure. The endorsements do not cover aspects of the law relating to duty of fair representation or fraudulent claims.
Members do not want to wait another 18 months
Paul Lewis, partner in the insurance and reinsurance disputes team at Herbert Smith Freehills, worked closely with Airmic on the paper, and commented: “These endorsements should certainly help some Airmic members enjoy the benefits of the reforms sooner than August 2016 by helping guide their discussions with their insurers.”
John Hurrell, Airmic’s chief executive, urged members to read the briefing paper and use it as the basis of discussions with the market: “It has taken years to get the reforms into law and now we have finally won that battle our members understandably do not want to wait another 18 months to see the rewards. The endorsements should make a huge difference to policyholders who want to make those changes now.”
There is no one-size-fits-all remedy
Lewis stressed, however, that there is no one-size-fits-all remedy. “This isn’t something that can simply be cut and pasted into an existing policy. The wordings are only samples and policyholders need to be careful in how they incorporate them into their contracts.”
Indeed, the paper notes that members should take particular caution if their existing policies are more advantageous in places than the terms of the Act. Similarly, “care must be taken to ensure that the sections of the endorsement that are used are compatible with the existing terms of the policy.”
Most insurers have been supportive of the reforms and since it became law many have publicly stated their intention to implement its changes with immediate effect. “Given these positive comments we have seen coming from some of the leading players in the market, we would certainly hope they would be receptive to what we are proposing,” Hurrell added.
Next on the agenda: fair presentation of risk
The briefing is the second in a series of papers published by Airmic to help members prepare for the Insurance Act. The first guide, The Insurance Act 2015: What members need to know was published in March and explains the core changes of the reforms and gives advice to members on the key next steps they should be taking.
The third paper, to be released later this year, will advise policyholders on best practice for meeting the new standards on the “fair presentation of risk” during the disclosure process. The guide will be prepared by Airmic after a series of roundtable discussions and workshops involving Airmic members and market representatives.
Act now
Airmic has been encouraging its members to start preparing for the changes as soon as possible and to start talking to their brokers and insurers immediately. Herbert Smith Freehills’ Lewis echoed this sentiment, saying: “Policyholders are becoming more aware of the changes soon to take place, and that’s extremely important. Although the implementation date is over a year away, that’s actually not much time given the work involved in ensuring they will be compliant.”
The changes to the law will not only provide extra protection for commercial policyholders, but will bring the UK up-to-date and into line with other insurance markets. Airmic has long regarded the old legislation as out of touch with modern business and unfair to buyers, and has worked closely with the wider market to bring about this reform.
The paper, Insurance Act 2015: Taking advantage of the Insurance Act’s benefits now, can be downloaded here.