The new laws, which take effect fully from August 12, toughen up the need for businesses to disclose all information which could influence an insurer in the fixing of a premium or deciding whether to underwrite a risk.
When the Act comes into force, businesses will be required to disclose either:
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Every matter which they know, or ought to know, that would influence the judgement of an insurer in deciding whether to insure the risk and on what terms; or
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Sufficient information to put an insurer on notice that it needs to make further enquiries about potentially material circumstances.
Stuart Bennett, a director of online business insurance firm Quote Dave said: “Although the Act represents a toughening up of the current system, it is intended to assist business and it does in a number of areas.
“The area that remains grey is what should be disclosed when a business is taking out or renewing an insurance policy. How does a business owner know what influences the judgement of an insurer?
“The Act creates what is known as a new ‘duty of fair presentation’ aimed at ensuring that facts are disclosed in advance of any premium being set.
“By disclosing anything you think may be relevant, no matter how small, at the outset, the worst that can happen is a business’s premium might go up or even that an insurer may refuse cover. This is far better than not disclosing everything it should have done only to find that an insurer will not pay out in the event of a claim being made.
“In my experience, insurers take a more relaxed view when there is the possibility of obtaining some business than they do when they might be paying out for a claim.
“This is the biggest change to insurance contract law for over 100 years, but the vast majority of SMEs will still be completely in the dark about the obligations they face.”
The Act is the result of a joint review by the Law Commission and Scottish Law Commission.
Quote Dave aims to help SMEs find the right business insurance policy quickly and easily. It is able to offer customers insurance policies from leading insurers including RSA, AXA and Allianz.
Stuart added: “Due to consolidation in the insurance sector, SMEs are finding it increasingly hard to get the personal advice and guidance they need to be able to make informed decisions about their insurance.
“In order to avoid falling foul of the Insurance Act it is really important that SMEs are fully aware of the implications for them if they are to ensure they have the right insurance in place to protect their businesses and their employees when they need it most.”
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