The biggest change to insurance law in more than 100 years comes into force today and it is expected to present both opportunity and uncertainty for brokers.
The British Insurance Brokers’ Association (BIBA) has welcomed the implementation of the Insurance Act 2015, a measure that seeks to increase professionalism in the placing of commercial insurance.
The new law – which will affect every business insurance policy placed, renewed or amended after today – aims to make seeking payment from insurers simpler and fairer in the event of a claim.
Many positive developments that BIBA lobbied for are included in the new act, such as outlawing the “basis of the contract” and “terms not relevant to the actual loss” clauses.
It also brings new requirements for customers, which could impact brokers, such as the “duty of fair presentation” and the obligation of “reasonable search.”
“We are delighted that the Insurance Act is now in force,” said BIBA chief executive Steve White.
BIBA has worked with insurance governance firm Mactavish in publishing several guides for its members and customers to assist in the enforcement of the Insurance Act.
“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,” said Mactavish CEO Bruce Hepburn.
However, BIBA said the measure will also bring new considerations for brokers and businesses when arranging insurance.
In one of their published guides, BIBA also said that the law introduces “considerable uncertainty” and raises “a number of tricky practical questions and creates potential hazards for the broker and customer.”
“Much of this uncertainty naturally falls on the broker’s shoulders… In practice therefore, the broker is at the coal face of most of the Act’s impact,” the industry body said.
BIBA said the Insurance Act is a “principles-based” legislation and much of the practical detail will need to be worked through by the courts based on litigation.
“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,” White said.
White is calling on insurers who may choose to “contract out” of the Insurance Act or parts of it to be clear about this and inform brokers about any disadvantageous terms.
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