International law firm DAC Beachcroft has welcomed today's announcement that the Insurance Act 2015 has received royal assent and will come into effect in August 2016.
Reacting to the announcement, DAC Beachcroft partner Nick Young commented: "After nine years of work and a whirlwind of activity in the last few months, I am delighted to see this Act succeed. Whilst there may now be a temptation to relax, 18 months is not a long time for insurers to make the necessary changes to their policies and procedures.
"They will need to carry out their impact assessment; consider whether to contract out of some of the provisions; review existing policy wordings, underwriting guides and policy documentation; and train claims handlers and underwriters to ensure that their practices are fully compliant. There is a lot to do."
The key changes introduced by the new Act alter the duties of insureds and insurers on presentation of a risk; the effect of certain terms such as warranties and other terms descriptive of the risk; as well as clarifying the remedies for fraud. In the event that an insured fails to make a fair presentation, the remedies are no longer "one size fits all" but instead proportionate, dependent on what the insurer would have done had the presentation been a fair one.
Commenting on the key issues for commercial policyholders, Nick Young added: "Businesses seeking insurance need to understand the rules against which they will be measured in presenting the risk. They need to be clear about who, both within and outside their organisation, needs to be consulted in order to gather information for a fair presentation to insurers."
James Deacon, also a partner at DAC Beachcroft, noted: "This Act also enables separate earlier legislation to come to fruition, allowing a third party to bring a claim directly, and far more easily, against a liability insurer where the policyholder has become insolvent. The hope is for that legislation to come into force this Autumn."