Insurance Act 2015 brings corporate responsibility for fleets
The Act, which became law in February 2015, affects the information exchange between insurer and insured. The aim is to reduce the number of disputes and disruption caused by policy avoidances for non-disclosure, breaches of warranty and the growing problem of fraudulent claims.
The new Act puts the duty on the commercial insurance policyholder to make a ‘fair presentation of the risk’ to their insurer, however, the precise boundaries of this obligation will be a matter for the courts to determine over time.
Guidance issued by the Chartered Institute for Insurance and companies such as Zurich Insurance suggests that the policyholder should tell the insurer about all “material facts” and should not misrepresent any material information, that would influence the decision about whether to offer insurance in the first place.
In response, LICENCECHECK said that the most important point for fleet operators is that the obligation to disclose material information is now a corporate responsibility. Knowledge of issues that would influence an insurer in taking on a risk and setting the premium will include information known to the fleet manager and their staff, as well as knowledge of senior management and anyone involved in setting insurance for the business.
It added that robust information systems and communications within an organisation are critical. A failure to keep proper fleet records and providing inaccurate reports or information to brokers and insurers could, at best, lead to a reduction in a claim or penalty premium or, in the worst case, the point blank refusal of a claim and loss of premium.
Commenting on the new Act, Richard Brown, managing director of LICENCECHECK, said: “A complication is that the duty on a company to disclose material information does not apply where the insurer already knows this information, ought reasonably to know it, or is presumed to know about it. In this case the policyholder is not obliged to volunteer the information themselves. Once again until the courts have re-drawn the boundaries of reasonable presumed knowledge, the full extent of this exception will remain uncertain.
“At this point in time, senior managers and those charged with effecting insurance on behalf of their company should err on the side of caution and provide reports and information even if they are unsure whether it is material or not to the insurance policy. It will then be the decision of the insurer to investigate this information in more detail should they consider it relevant.”