What is a material circumstance under the Insurance Act 2015?
Any information that would influence a prudent insurer’s decision to accept the risk, on what terms or at what premium.
Who has the duty of fair presentation of the risk under the Insurance Act 2015?
The insured, but the broker shares responsibility because the broker’s knowledge is treated as part of the insured’s knowledge.
What must a fair presentation of the risk contain?
All material circumstances known or that ought to be known, or enough information to put the insurer on notice to ask more questions.
Whose knowledge must be included in a fair presentation?
Senior management, the insured’s insurance team (including the broker) and information revealed by a reasonable search.
Give two examples of what insurers are taken to know and so need not be disclosed.
Information in their own records and what a prudent insurer would reasonably be expected to know (e.g. common knowledge in the market).
If in doubt whether information is material, what should a broker do?
Disclose it clearly and promptly, as non-disclosure is more dangerous than over-disclosure.
How should old but significant losses be treated in a claims experience?
Disclose them if they are still material, even if they fall outside standard 3–5 year experience periods.
Why must uninsured as well as insured losses be disclosed when material?
Because they show the true loss history and may affect rating, deductibles or the need for new classes of cover.
What did the Insurance Act 2015 do to ‘basis of contract’ clauses for business insureds?
It abolished them; insurers cannot turn pre-contract information into warranties in this way.
Under the Insurance Act 2015, what happens if a warranty is breached?
Liability is suspended during the breach but resumes once the breach is remedied; the policy is not automatically terminated.
Can a breach of warranty defeat a claim unrelated to the breach under the Insurance Act 2015?
No, a breach cannot be used to refuse a claim if unconnected to the loss (unless there is fraud).
What can an insurer do if a business insured makes a fraudulent claim under the Act?
Refuse the fraudulent claim, terminate the policy from the date of the fraud and recover any sums paid after that point.
Can insurers contract out of the Insurance Act 2015 for business insureds?
Yes, except for basis of contract clauses, if the disadvantageous term is drawn to the insured’s attention beforehand and is clear and unambiguous.
Why must brokers explain post-loss conditions carefully to clients?
Because post-loss obligations (e.g. notification procedures) are outside the Act and breaching them can still jeopardise claims.
What is a statement of fact in insurance?
A document of pre-printed assumptions forming the basis of the contract, which the customer must check and correct if wrong.
How does a statement of fact differ from a proposal form?
A proposal form asks questions; a statement of fact sets assumptions that the customer must confirm or amend.
For which risks are proposal forms or statements of fact most common?
Personal lines and small to medium commercial risks such as packages, property, motor and liability.
What role should a broker play in completing a proposal form?
Explain questions, advise what information is relevant, help the client understand their duty and check that answers are complete and accurate.
Should a broker ever sign a proposal form for the client?
No, unless acting under an exceptional, explicit power of attorney; normally the client must sign.
Why is it vital for clients to understand that a proposal or statement of fact forms the basis of the contract?
Because errors or omissions, even innocent ones, can affect cover and the insurer’s liability to pay claims.
Why may proposal forms be impractical for large, complex risks?
They cannot capture the detailed, bespoke information needed across many locations, activities and exposures.
What tools often replace proposal forms for large risks?
Tailored questionnaires, survey reports, loss analysis and detailed financial and operational information.
What is a risk of relying only on brokers’ questionnaires with no meetings?
It may be seen as poor service and could lead to gaps in understanding the client’s operations and exposures.
Why must claims information be presented clearly and fully to insurers?
Because it underpins pricing, deductibles and cover; poor or unclear claims data weakens the broker’s negotiating position.
