Marsh agrees principles with major carrier to improve contract efficacy

The move is designed to address concerns of Airmic and UK insurance buyers over contract efficacy and redress what many risk managers see as unfair practices by insurers. The principles will come into practice ahead of changes to the UK's insurance contract law planned for next year. These changes will see some of the more contentious areas of the Marine Insurance Act 1906 removed from the default legal position for insurance policies under UK law. Speaking at Marsh's annual UK client event in London this week, Mark Weil, CEO of Marsh UK & Ireland, said his firm and a 'major carrier' have agreed to adopt a set of principles to improve contract efficacy. Although he was unable to name the insurer, Mr Weil said that details will soon emerge.hideHe also said that Marsh expects other insurers to follow suit and sign up to the principles. "We expect that once we have one major carrier on board and agreeing to these principles the rest will follow. For us it's a big step forward to give you (the client) confidence in the insurance you are taking out and to have these things baked into the way contracts are set," said Mr Weil. The principles were agreed following consultation with Airmic and other stakeholders. They will ensure that there are no implied warranties or conditions precedent in insurance contracts. Under the principles a contract breach needs to relate to a loss to matter and have consequence on the status of being insured. If there is a breach it will lead to suspension until redeemable, rather than termination of the contract. The principles also plan to mitigate the effect of non-disclosure of material items and nullify basis of contract clauses. Airmic and insurance buyers have long called for changes to UK insurance contract law because the Marine Insurance Act 1906 is said to overly favour insurers, enabling them to avoid claims or negotiate discounted settlements by exploiting contentious areas such as non-disclosure, warranties and basis clauses. "The current law may be certain on paper but it is about as unfavourable as you can get for policyholders anywhere on the planet," David Hertzell, the UK's law commissioner for commercial and common law, told Commercial Risk Europe earlier this year. Under the Marine Insurance Act, commercial policyholders face an onerous duty to disclose material information to their insurer, even if an insurer did not specifically ask for information. Failure to disclose can result in the insured voiding the contract, even if the information was not relevant to the cause of any loss or associated claim that occurred. This is a situation that Airmic regards as unfair and disproportionate. The Law Commission is expected to change key areas of UK contract law next year to make them more favourable for insurance buyers. However, in the meantime Airmic has been pushing for the market to introduce fairer practices on its own accord. The association and its members will therefore be pleased to hear of the progress made by Marsh and at least one of its insurance partners on this issue.

Marsh agrees principles with major carrier to improve contract efficacy

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