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The Insurance Act 2015 17/02/2015 The Insurance Bill received Royal Assent last week, implementing reforms recommended by the Law Commissions of England and Wales and of Scotland

The Insurance Act 2015

The Insurance Bill received Royal Assent last week, implementing reforms recommended by the Law Commissions of England and Wales and of Scotland in their 2014 report Insurance Contract Law: Business Disclosure, Warranties, Insurers’ Remedies for Fraudulent Claims, and Late Payment.

The reforms include:

  • Disclosure and misrepresentation - Under a new “duty of fair presentation”, business policyholders will still have a duty to volunteer information, but what is required of them is made clearer, and insurers will have to play a more active role in asking questions of the policyholder. A new scheme of proportionate remedies will replace the existing single remedy of avoidance, which allows insurers to refuse the whole of a claim.
  • Warranties - Insurers will be liable to pay any claim that arises after a breach of warranty has been remedied such as where a broken burglar alarm has been repaired before the claim arises. And they will no longer be able to escape liability on the basis of the policyholder’s breach of a contract term that is shown to be completely irrelevant to the loss suffered. “Basis of the contract” clauses, which can turn any statement from a policyholder into a warranty, will be abolished.
  • Remedies for fraudulent claims - The Act provides insurers with clear, robust remedies when a policyholder makes a fraudulent claim. Where any part of a claim is fraudulent, they will be entitled to refuse the whole claim. They will also have the right to refuse any claim arising after the fraud but must pay earlier, valid claims.

The Act also includes provisions relating to the Third Parties (Rights against Insurers) Act 2010.  These simplify the procedure by which third parties can claim against an insurer when the insured is, in broad terms, insolvent or has been dissolved.

The new law has been welcomed by the Law Commissions.

“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,” said Professor Hector MacQueen, Law Commissioner leading on the project for Scotland. “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.”


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