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The Act, which applies to all commercial insurance policies written under English and Scottish law from 12 August, is intended to shake up insurance placement and contract law, requiring a more professional app-roach to disclosure and underwriting.
August renewals are already fairly well advanced, seeing large corporates engage with insurers over the Act, according to Brian Kirwan, chief executive of Allianz Global Corporate and Specialty (AGCS) in the UK.
“Policyholders and brokers have done well thinking through the Act but some underwriters have struggled with responding to requests. Underwriters are in a difficult position and have come to realise what the Act means for them,” said Association of Insurance and Risk Managers in Industry and Commerce (Airmic) chief executive officer, John Hurrell.
Bruce Hepburn, chief executive of insurance governance firm Mactavish, believes the insurance industry is failing in its response to the Act and requests from insurance buyers for clarity around disclosure. Having had 18 months to prepare for the Act, insurers have either just “sat on their hands” or misjudged its complexity, choosing to focus on their own internal processes, he said.
“Some insurers are much more advanced than others…but overall, the insurance market is not doing what is expected of it. It was given 18 months, not only to prepare on an individual company basis, but to develop market practices in the absence of common law,” said Mr Hepburn.
“But we are not seeing market practices arise in a number of important areas and this will create uncertainty. Market failings will leave many questions unanswered and left for the courts to decide,” he said.
In particular, the insurance market has failed to develop codes of practice to address contracting out, definitions of a reasonable search and Sections 10 and 11 of the Act, which cover breach of warranty and terms not relevant to the actual loss.
“The bottom line is that brokers are grasping the challenge but customers are underestimating the challenge and insurers are backwards in coming forward in addressing the challenge. Many insurers see the Act as a challenge for brokers and clients rather than themselves,” Mr Hepburn added.