Whisper it quietly, but the implementation of the Insurance Act is just two months away – and yet it seems many companies are woefully unaware of what it will involve.
Described as one of the biggest shake-ups in UK insurance law for more than a century, the Insurance Act will come into effect on August 12 and make major changes to the industry. However, Gordon Duncan, partner and head of corporate at Lockton’s Corporate Scotland, told
Insurance Business UK that many firms simply haven’t heard of the change – and, even among those that have, many don’t know what to do about it.
“When I have discussions with prospective clients and raise the subject of the Insurance Act, across a range of spectrums there is a blank expression on their face,” he said. “Or, they may have heard about it, but they know very little detail – and that, to me, is quite concerning.
“It will create a different dynamic between the insurer, the client and the broker, and those parties involved need to take action now to apprise themselves of the altered circumstances.”
So what is the cause of the problem? According to Duncan, the main issue is a lack of awareness.
“I wouldn’t say it’s a lack of education – because you can’t be educated on something you’re not aware of,” he said. “However, I don’t understand the reason for this lack of awareness – the Act is, after all, quite significant. It is based upon engaging with prospective clients, bringing this to their attention and what the implications can be.
“It is not just the smaller ones here in Scotland – it’s across a spectrum of organisations. And if sizeable brokers are not informing their clients here in Scotland then you could assume that it won’t be any different south of the border.”
The main components of the new Act are: remedies for the breach of the duty of fair presentation; warranties and other terms; contracting out; the duty of fair presentation of the risk; and the abolition of basis clauses. The Act has come about because it has been deemed that current laws are out of step with the modern realities of commercial practice.
Mr Duncan added: “This is very much a positive for the industry. It promotes more positive engagement with the client. Any change in legislation that encourages the relationship between the client and broker can only be good.
“If a client has a claim and the broker hasn’t informed them about the ramifications of the Act then there is a real risk of an uninsured exposure. That could be absolutely critical.”
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