ACE has followed in the footsteps of AXA and promised to remove basis clauses from UK contracts. It remains to be seen whether other leading insurers will follow suit, but Airmic says its campaign to abolish basis clauses is winning market support.
Airmic is urging members to lobby risk transfer partners to remove all basis clauses from policies. It said this week that it has been informally approached by other insurers to address buyer concern over what have been described as archaic wordings. However, these discussions have not yet led to public statements of intent.
The Lloyd's Market Association, which represents all managing agents, said it supports in principal plans by the UK Law Commission to ban basis clauses, but is yet to fully commit to their removal from Lloyd's contracts.
Basis clauses operate as a warranty that all information given by the insurance buyer at the time of placing insurance is correct, such that any minor factual error will discharge insurers from liability under policy-even if the error is unintentional and not material to the risk.
As part of its planned changes to contract law, the UK's Law Commission is proposing that basis clauses be abolished in commercial insurance.
As reported in Commercial Risk Europe last week, AXA were the first major insurer to express their unconditional support for the initiative. "We will be taking action to ensure that our Property and Casualty contracts do not contain any 'basis clauses', and that any existing clauses are removed", said Paul Lowin, AXA Corporate Solutions Regional Commercial Manager.
ACE followed suit this week with an announcement that it will remove the basis of contract clause from UK wordings issued under its European Group stamp for new and renewed business. "This is an important initiative for us and one that is a direct result of feedback from our customers", said David Robinson, Regional President, UK & Ireland. Through constant dialogue with brokers, clients and Airmic, ACE said it has become aware that buyers are increasingly concerned that incorrect information provided in good faith could invalidate certain aspects of their policies.
ACE believes that removing the basis clause is a major step towards allaying these concerns and providing clients with a better and more transparent service. ACE has already removed the clause in certain product lines and, where requested by clients or brokers, on a case-by-case basis in others.
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