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Mr Bruce Hepburn, Chief Executive of insurance governance firm Mactavish, said that buyers and their brokers should review the way that information is collected and provided to insurers to ensure that they comply with their obligations under the 2015 Insurance Act.
The Act sets out the duties placed on insured, but some policyholders will expect their broker to carry out such work and arrangements will need to be discussed and agreed in advance, said Mr Hepburn. Some brokers are expected to decline to take on such work, he explained.
The UK Insurance Act 2015, which will be implemented in August 2016, aims to raise standards of commercial insurance contracts, with an emphasis on professionalism. It applies to insurance contracts under English Law, but is not restricted to UK policyholders. The Act will apply to overseas policyholders insured by UK-based insurers under English law, including those in the London market.
Under the Act buyers and their brokers will have to be more proactive and considered when providing information to underwriters, explained David Hertzell, former UK law commissioner and now adviser to Mactavish.
The Insurance Act will put brokers under added pressure, according to Mr Hepburn. "Some clients will look to their brokers to meet their obligations under the Act, but brokers could find that they are the ones left standing when the music stops," he said.
Insurers have been criticised for using contract terms-such as basis clauses or breach of warranty-to unfairly avoid paying claims, or at least negotiate claims settlements. However, many of the problems regarding the efficacy of insurance contracts are the result of brokers and buyers not adequately identifying the potential risks, and not buying appropriate cover, according to Mr Hepburn.
"The Insurance Act is a big opportunity for brokers to provide added value," said Mr Hepburn. "One of the most interesting issues will be whether brokers are willing to challenge customers to put the time and money into lifting standards, as encouraged by the Act," he added.