The Insurance Act 2015
The Insurance Act 2015
IMPORTANT INFORMATION – PLEASE READ
Duty of Fair Presentation
The Insurance Act 2015 imposes an obligation on all policyholders to “make a fair presentation of the risk”
prior to the policy commencing. A fair presentation is one that discloses, in a manner that is reasonably clear
and accessible, every material circumstance which is known or ought to be known, by the policyholders senior
management or those responsible for arranging the insurance, following a reasonable search.
A material circumstance is anything which would influence the judgment of a prudent insurer in determining
whether to take the risk and if so, on what terms. There is no specific limitation on what constitutes a material
circumstance, but they would typically include any factors pertaining to the risk to be insured including prior
claims, your financial history, convictions of key personnel and your business activities.
You are not only obliged to disclose material circumstances that you actually know, but also those that you
ought to know. This means that if the information is readily available to you but you fail to disclose it owing to
either not conducting a reasonable search of due to “turning a blind eye”, you will have breached your duty to
fairly present the risk.
What is a reasonable search?
What is reasonable will depend upon the nature of your business and the policy you are purchasing. We will
provide you with advice in each case as to what might be reasonable. When considering the extent of your
search, you should take into account the nature of the insurance you wish to purchase and consider who
within your organisation is best placed to provide relevant information.
What happens if I do not fairly present the risk?
If you fail to comply with your obligations, insurers have differing remedies depending upon the nature of the
breach and what would have happened had you fairly presented the risk.
If you deliberately or recklessly fail to present the risk fairly (eg: you deliberately withhold key information, or
fail to take any care when presenting the information), insurers are entitled to avoid the policy and retain all
the premiums. In other words, insurers can treat the policy as if it never existed, which would result in no
claims being paid. You could also be required to repay any claims payments that have already been made.
If your failure to present the risk fairly, was neither deliberate nor reckless (eg: it was simply an oversight on
your part), insurers may still avoid the policy if they can demonstrate that the policy would not have been
provided if you had represented the risk fairly. In this scenario, insurers would be required to repay the policy
premium to you although, they would be not be required to make any payment in respect of claims and you
would be required to repay any claims payments already made.
If the insurers are able to demonstrate that they would have provided the policy but on different terms, the
policy would be treated as if those terms had applied from the beginning. Those additional terms could be, for
example, increased excesses or additional exclusions. Those additional terms may result in no payment being
made in respect of any particular claim (eg: if insurers would have excluded that particular activity or imposed
additions conditions which you did not comply with)
If insurers would have provided the policy, but are able to demonstrate that they would have charged an
increased premium, the amount insurers will pay for any claims will be reduced by the proportion to the
difference between the premium actually paid, and the premium that would have been charged had the risk
been fairly presented. By way of example, if a fair presentation would have resulted in the premium doubling,
any claims payment under the policy would be halved.
