Insurance Act Workshop Highlights Key Considerations for Public Entities
The Insurance Act 2015 comes into force on 12 August 2016, bringing about the biggest change to English insurance contract law in more than 100 years. At our Public Entities Client Day in Cardiff on 13 July, we discussed what these changes mean for our public sector clients.
We started by asking attendees how comfortable they were with the Act, and the view of the majority was they were not yet completely comfortable, but neither were they overly concerned. This is reasonable; we are dealing with a new and untested area of law. Equally, in recognising that the overall objective of the Act is to create a more neutral legal environment between policyholder and insured, the view of the room, echoed by the insurers who were present, was not to look too fearfully at the forthcoming changes.
From our discussions, it was agreed that public entities should consider taking the following actions:
- Decide who constitutes “senior management” and seek input from them and from the “persons responsible for your insurance” during the annual insurance information-gathering exercise. (We all recognised that public entities are large, complex organisations where it can be difficult to get “air time”).
- Formally map out a process to search for and gather material information (and record what search has been done so this can later be called upon as evidence).
- Complete broker and insurer questionnaires/proposal forms fully and accurately (flagging to your broker any areas of uncertainty).
- Work collaboratively with insurers to try to agree practical processes, and limits on the information they require (this is of particular importance for policies with multiple beneficiaries, such as travel or officials’ indemnity).
- Recognise that some insurers may contract out of the Act, (for example be wary of Lloyd’s Market Association clauses).
- Work with your broker to understand the different approaches being taken by different insurers – some are looking to contract out of parts of the Act, whereas some are willing to offer enhanced language in policies.
- Consider how you will evaluate these differences when reviewing tender responses.
- Preserve existing cover benefits (for example, any innocent non-disclosure clauses that provide more protection than the Act).
- Understand the potentially severe consequences of a proportionate claim reduction, including to excess liability policies.
- Consider the pros and cons of the position taken by ZMI (charging an additional premium rather than proportionately reducing the claim).
I encourage all clients to look at the detailed information contained on our Insurance Act page in advance of your next renewal, or before making any changes to policies.