Are you familiar with the U.K. Insurance Act dealing with “Fair Presentation of Risk” ?

Oftentimes, I have used this media to communicate issues dealing with the importance of being honest with your carriers, This includes the material used to communicate the nature of the risk (the application) as well as other communication (i.e. answers to underwriter questions).

Carriers are certainly expecting (and they have a right to) that the information provided by agents and brokers accurately represents the risk. When it doesn’t and when the risk has a loss, the carrier may allege that they would not have written the account had they known the “correct” information. This is definitely a matter not to be taken lightly.

Within the last couple of years, the United Kingdom has enacted some legislation (The Insurance Act 2015) which made significant reforms to insurance law. For agents and brokers dealing in the London and U.K. market, the changes are significant and need to be acted upon.

Basically, the essence of the Act requires policyholders and potential policyholders purchasing insurance in the UK (and through the London markets) to make a “Fair Presentation of Risk” that they are seeking to insure.  What exactly does that mean?

Some of the key components of this Act:

The policyholder (and potential policyholders) must conduct a “reasonable search” of their exposures. Specifically, they are required to:

– Make adequate inquiries within their business to identify and verify information relevant to the insurance they are seeking to obtain.

Inquiries should include all relevant knowledge of the Sr. Mgmt of the business and those involved in the buying process.

– Reasonable inquiries must also be made of any relevant third parties involved with the business (includes external consultants, contractors, etc.)

All of the risk information identified through the “reasonable search” must be presented clearly and in a manner that will enable prospective insurers to access the risk. Simply providing them with a voluminous amount of information (“Data dumping”) and expecting the U.K. market to dissect it is not allowed.

It is expected that not only should significant information be highlighted but also unusual activities and/or known areas of concern that could affect the insurance should be highlighted.

This is an issue that must be taken seriously when dealing with the U.K. market. What are the potential ramifications? Failure to adequately satisfy these obligations can result in rescission or reformation of any coverage secured. E&O claims would be sure to follow.

To ensure that clients and potential clients are aware of this, agencies should look for a means to communicate this information (in writing) to their clients (current and potential).



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