One of the most important aspects of being an insurance broker is remaining within the law at all times. However, it’s not always easy to navigate the plethora of finance and insurance laws that apply in the UK, which means that disputes are often common between brokers and their customers.
This is why a new Insurance Bill has recently become law which pushes for greater transparency for all involved. Even though this Bill is focused at commercial insurance law, it is still prudent for brokers specialising in consumer products to understand the changes that it will bring to the industry.
So far, the insurance sector has welcomed this new Bill, as laws concerning commercial UK insurance policies have not been updated for over 100 years. Previously, insurers and their customers were protected under the Marine Insurance Act of 1906, however under the new Bill changes have been made to duties of disclosure, warranties and remedies for fraudulent claims.
Stephen Lewis, Law Commissioner now leading on the Insurance Contract Law project for England and Wales, said: “We are delighted the Government has implemented the majority of our recommendations in the Insurance Bill. Insurance underpins a healthy and prosperous society. It enables businesses and individuals to protect themselves against risk. But insurance contract law was out of date and no longer reflected the realities of today’s commercial practices.
“The provisions of the Insurance Act 2015 will modernise the law; balance more fairly the interests of insurers and buyers; and provide a framework for an effective, competitive and trusted business insurance market. The Act will come into force in August 2016, giving the industry plenty of time in which to prepare.”
Meanwhile, Professor Hector MacQueen, Law Commissioner leading on the project for Scotland, said: “The existing law that governs business insurance contracts is weighted in favour of insurers, giving them wide-ranging powers to refuse claims. These powers, even if rarely used, can undermine trust between insurers and policyholders.
“Our recommendations received strong support from across the insurance market, and we were pleased to see these urgently needed reforms complete their passage through Parliament following the Law Commission procedure for uncontroversial Bills. We look forward to the Insurance Act 2015 coming into force and delivering for the UK a legal framework fit to support our world-leading insurance industry.”
Even though the new Bill has received Royal Assent, it will not be enforced until autumn 2016 after an 18 month referral period. However, insurers are still confident that changes will be made in the near future, changes which have been welcomed by key industry players. For example, John Hurrell, CEO of Airmic, said: “We are delighted to see this important bill complete its passage through parliament.
“The provisions of the new Insurance Act brings this country’s insurance contract law for commercial insurance up-to-date and fit for the modern world. So far the UK insurance market has been positive and responsive to the proposed changes so we hope they will choose to move more quickly than this.”
Meanwhile, James Dalton, Director of General Insurance at the Association of British Insurers (ABI), said: “We welcome the modernisation and rationalisation of insurance contract law, undertaken by the Law Commission and HM Treasury working with the industry and other stakeholders. The Insurance Bill codifies existing industry best practice to the benefit of customers and has been supported by the ABI and its membership.”
Going forward, commercial insurance brokers will need to ensure that all their activities are in-line with the new Insurance Bill, otherwise they could find themselves acting illegally. However, the Bill should benefit commercial insurance brokers as not only will it create better relationships between themselves and their customers but it should also reduce the amount of disputes made against them.
As a broker of consumer products you will already be aware that in 2013 the government implemented a new Consumer Protection Act in order to address similar issues covered in the new Insurance Bill. Through this act consumers were given greater power when challenging insurers who they feel are not treating their claims fairly, something that now also applies to commercial customers.
Both the Insurance Act 2015 and the Consumer Insurance (Disclosure and Representations) Act 2012 aim to improve the relationships between insurance providers and their customers, regardless of whether they are purchasing commercial or consumer products. As an insurance broker it is therefore of the utmost importance that you understand the purposes behind these acts and apply best practices to your business.