The UK Insurance Act: Will it make insurance harder to place?

This is not as straightforward as it appears. In the absence of an express clause, international choice of law rules should be analysed and if, after applying the relevant test, the law to be applied to the policy is English law, then the Act will apply. Risk managers therefore need to be aware of the Act and we address here changes regarding the placing of the risk. While the insured’s primary duty to provide material information which it (i) knows or (ii) ought to know remains unchanged, the Act has defined these concepts. In common with Australia, for example, the insured ‘knows’ what is actually known by its senior management and those placing the insurance. In common with Hong Kong, the insured ‘ought’ to know what would reasonably have been revealed by a “reasonable search”. This concept is as yet untested in the English courts. Risk managers may ask: Who falls within the scope of “senior management”? How far down the chain must enquiries be made? In the context of group cover, risk managers may have only limited information to hand regarding individual companies’ risks. What if an individual (for whatever reason) unreasonably withholds a material fact when responding to a request, will the insured company still be deemed to have knowledge of that information? How can commercially sensitive information be protected? How can a potentially huge volume of information be corralled so that a presentation can be said to be “clear and accessible” (as required by Section 3)? hide Some of these concerns can be overcome: for example, a non-disclosure agreement can be concluded with underwriters. An open dialogue with underwriters can also flush out how an underwriter would like to see information presented and whether, for example, summaries might be acceptable. However, other concerns are perhaps unfounded. It is true that insurers may push back on attempts to have them confirm that a reasonable search has been carried out (on the basis that they do not know what they do not know, so only the insured can confirm whether the search has been reasonable in all the circumstances, given its knowledge of its own business). But it should be recognised, too, that the law has not changed to any marked degree in this context and therefore the insurers’ approach is unlikely to have changed much in practice either. Prior to the Act, an insured was still deemed to know that which it ought to know in the ordinary course of business, and the knowledge of its directors would also be imputed to it. Risk managers and others arranging insurance would have therefore been expected to ask questions before putting together the placing information. Accordingly, a failure to take reasonable care and carry out a reasonable search would most likely have exposed an insured to non-disclosure/misrepresentation arguments even before the Act came into force (although, it is fair to note that it had been unclear whether the old test was a subjective, rather than objective, one). The Act has certainly underlined the steps that insureds should take when placing insurance, and an increased dialogue between insureds, insurers and brokers may have served to highlight pre-existing shortcomings. But in such circumstances, problems would have arisen even in the absence of the Act. It might be suggested that insurers should be pressed to accept a presentation based on only limited enquiries. While tempting, that course may only defer a problem, rather than solve it. If it later emerges that a reasonable search would have brought material information to light, then insurers who have been deprived of a remedy will probably be reluctant to renew. In most cases, the better approach will be to make the appropriate enquiries and document them. It is also worth bearing in mind that much of the Act is helpful to insureds. In particular, it moderates the remedies available to insurers for breaches of the duty of fair presentation and, in some cases, for breaches of warranties or conditions precedent. In common with Australia and, to an extent, Hong Kong, the Act is perceived to produce a more balanced insurance regime. Legal eye: The briefs China punishes more than one million for corruption in three years More than one million officials have been punished for corruption since 2013, according to new statistics from the government’s central committee for discipline inspection. It also revealed a further 409 people, said to be fugitives, have been detained overseas this year. President Xi Jinping has led a wide-ranging anti-corruption drive. Those caught up in the corruption drive range from low ranking officials to top ministers, as well as members of the business and media establishments. Thailand opens first anti-corruption court Thailand has opened its first specialised court dedicated to anti-corruption. The court was officially opened in October, with the objective of resolving corruption cases more quickly and expanding the scope of the prosecution to cover both public and private-sector cases, as well as lower levels of government. The court will initially try 70 cases. The opening of the court follows Prime Minister Prayauth Chan-ocha’s crackdown on illicit corporate behaviour and his pledge to eradicate corruption in the country within 20 years. Cambodia and China in alliance on anti-money laundering A memorandum of understanding (MoU) has been signed between Cambodia’s Financial Intelligence Unit and China’s Anti-Money Laundering Monitoring and Analysis Centre, to allow for the exchange of information relating to anti-money laundering and terrorism financing. The MoU is designed to boost collaboration between the two countries on fighting cross-border financial crime. According to Cambodia’s central bank, the National Bank of Cambodia, the collaboration will focus on training, capacity building and technical assistance.

The UK Insurance Act: Will it make insurance harder to place?

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