Insurance Act 2015 will impact every business insurance policy: BIBA

The Insurance Act 2015, which comes into force today (Friday August 12), represents the biggest change to insurance law in over a 100 years and it will affect every business insurance policy placed, renewed or amended after today, according to The British Insurance Brokers’ Association (BIBA).

The association has welcomed the new legislation stressing that it will modernise insurance law and make seeking payment from insurers simpler and fairer in the event of a claim.

The Act includes many positive developments that BIBA says it supports including outlawing the ‘basis of the contract’ clauses which previously turned information provided by customers into warranties so that any change could have led to the end of the contract.

BIBA also supports ‘terms not relevant to the actual loss’ to be outlawed which means, for example, that if a policyholder has to stick with a warranty to turn on a burglar alarm but a claim is caused by a flood, then the insurer will accept the claim.

The Act will introduce requirements for customers, which could impact brokers, such as the ‘duty of fair presentation’ and the obligation of ‘reasonable search’.

BIBA has worked alongside leading experts on insurance governance, Mactavish, to publish a number of guides for its members and their customers to assist with its implementation.

“We are delighted that the Insurance Act is now in force. In the lead up to today, our members asked for guidance and I am pleased that we have been able to provide a number of publications to support them,” said Steve White, chief executive of BIBA.

“We know there will not be absolute certainty until some of the Act’s provisions have been tested in court, but armed with all of the information available, our members will be able to advise customers on the provisions of the Act.”

Although the market has been positive about the Act and will bring benefits, BIBA is calling on insurers who may choose to ‘contract out’ of the Act or parts of it, to be clear about this and bring any disadvantageous terms to the attention of brokers.

White added: “The industry has never experienced such a massive change in the legislation governing our practices, and we would like brokers and insurers to engage with each other in a way which adopts the Act’s requirements, to create a fair and transparent approach for all. We have provided a toolkit to help firms in our new implementation guide.”

Bruce Hepburn, chief executive officer of Mactavish, commented: “With the emphasis on a more professional market, the new law is a great opportunity for brokers to add value by providing crucial client advice and for policyholders to focus on the quality of what they have purchased rather than price alone.

“With the implementation of the Act, the ideal scenario would be for participants to be not only compliant but to also reap the intended benefits of the new regime.”