There are some rather eye-catching terms being thrown about regarding today’s implementation of the Insurance Act – the biggest change to insurance law for more than 100 years is one; the insurance equivalent of the Berlin Wall coming down is another.
However, what has become abundantly apparent is that there are a lot of industry commentators who believes that brokers and insurers alike are simply not prepared for what the Act will actually involve. In fact, there are serious fears that they may be caught out.
“Brokers and insurers need to make customer communications a two-way process so they are not caught out by the Insurance Act 2015’s introduction,” said Simon Perry, insurance subject matter expert at GMC Software. “The new legislation includes a ‘duty of fair presentation,’ making sure all parties have a proper understanding of risk and the factors involved. This means insurers must place a greater focus on communicating with customers than ever before.
“Like the Consumer Insurance Act before it, the Insurance Act 2015 forces brokers and insurers to treat customers as partners, to share more information and to provide understandable advice; facilitating two-way customer engagement has become critical. More than ever before, it’s crucial that information is clear, accurate and acted upon in good faith. Insurers need to get into a proactive mindset, ensuring that customers know what services are available to them; what information they should be sharing with their insurer; and the easiest way for them to do so.
“The days of insurers using a rigid set of traditional communication platforms to share one-way messages is over: they must be able to engage with their customers over any channel, whether that’s telephone, email or messaging applications. Aside from meeting terms of the Act, improving communication will also increase the likelihood of customer renewals. Customers can vote with their feet; even if an insurer is obeying the letter of the Act, from now on, their customers are likely to choose alternatives that make the process easiest for them.”
The Act, which replaces the 1906 Marine Insurance Act, will make it much harder, for example, for insurers to void entire contracts due to a relatively small or unconnected fact. The days, for example, of a flood insurance claim being refused because of a faulty fire alarm, are gone.
Of course, many insurers and brokers have already changed their procedures to fit in with the new guidelines – or indeed were working to them anyway. A survey of Airmic membership, for example, conducted in the two weeks prior to the implementation date, revealed that more than 90% of respondents feel fully prepared or relatively prepared for the law change. Satisfaction with the preparedness of the wider market was similarly high: 90% feel their brokers are at least relatively prepared, and 85% feel the same about their insurers.
“The new law represents a fundamental change in how insurers and buyers do business and the amount of work and cooperation required cannot be understated,” said John Hurrell, Airmic CEO. “Our survey results are therefore extremely encouraging: the whole market should be congratulated on coming this far.”
What’s clear is that with the Enterprise Act to follow and a ruling by the Supreme Court that could allow people who tell a collateral lie to still be able to make a successful claim, times are changing in the insurance industry. If you need more information on the Insurance Act check out our business strategy article “Insurance Act – Are you Ready?”
Insurance Act: Are you ready?
Huge shake-up in UK insurance law is coming – and firms aren’t ready