Airmic ahead of the game as UK insurance reforms become law

The Insurance Act 2015 replaces the Marine Act 1906 and will govern the placement of insurance in the UK. Airmic said yesterday that it will issue a briefing note to members in the coming week to outline the key changes. The UK insurance buyers' association last week urged the industry to implement the reforms as soon as possible rather than wait the full 18 months. It announced on Thursday that it is working with law firm Herbert Smith Freehills to develop a suggested clause that will allow insurers and policyholders to immediately contract as if the Act is in force.hideThe association is also hosting an Airmic Live Call on 25 February, during which members can hear from Herbert Smith Freehills, Zurich, JLT and former law commissioner David Hertzell about the new law. The new rules tackles disclosure issues that Airmic previously described as 'draconian' because of the scope they gave insurers to avoid paying apparently legitimate claims.The new law demands proportionate remedies for innocent non-disclosure and eliminates basis clauses. The Insurance Bill also provides protection for policyholders against the inappropriate use of warranty breaches to avoid policies. Insurers and lawyers have joined the buying community in welcoming reform of UK insurance contract law. The International Underwriting Association (IUA) and Lloyd's Market Association (LMA) both praised the reforms and said they are making plans to prepare their members for "fundamental changes" to insurance contact law. They said the reforms will impact insurers' day-to-day operations, consumer policy wordings and the consequences of fraud. The IUA and LMA are working with a number of leading law firms and counsel to prepare guidance to highlight changes in the law. The guidance will highlight how the changes affect the placement of insurance and reinsurance contracts, contract wordings and claims. Chris Jones, Director of Market Services at the IUA, said: "The IUA has been working closely with the Law Commission over a number of years to help establish a new set of laws that are fit for purpose and relevant to the modern insurance industry. Companies have been supportive of the need for reform and are now looking forward to operating under a more modern legal framework that provides greater clarity for clients." Kees van der Klugt, Director of Legal and Compliance at the LMA, commented: "In our evidence to the House of Lords committee, which carried out the substantive scrutiny of the proposed legislation, the LMA made clear its support for the core reforms: proportionate remedies for pre-contractual non disclosure; the banning of basis clauses; breach of warranty having the effect of suspending rather than discharging cover; and forfeiture being the remedy for fraudulent claims. "We were less supportive of some other changes, which did not appear central to the reform programme or to be problem areas in existing law. All changes in the law will to some extent produce uncertainty, as the House of Lords committee acknowledged, and the purpose of our guidance will be to identify these areas so that appropriate action can be taken in underwriting and drafting contracts." Law firm DAC Beachcroft also welcomed news that the Insurance Act had received Royal Assent. "After nine years of work and a whirlwind of activity in the last few months, I am delighted to see this Act succeed. Whilst there may now be a temptation to relax, 18 months is not a long time for insurers to make the necessary changes to their policies and procedures. They will need to carry out their impact assessment; consider whether to contract out of some of the provisions; review existing policy wordings, underwriting guides and policy documentation; and train claims handlers and underwriters to ensure that their practices are fully compliant. There is a lot to do," said DAC Beachcroft partner Nick Young. He added that commercial policyholders now need to understand the rules against which they will be measured when presenting their risks to insurers. "They (insureds) need to be clear about who, both within and outside their organisation, needs to be consulted in order to gather information for a fair presentation to insurers," he said.

Airmic ahead of the game as UK insurance reforms become law

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