Fair Presentation

Important Notice – The Insurance Act 2015 Duty to Make a Fair Presentation

Introduction

The Insurance Act 2015 came into force on 12th August 2016.

Under this Act, you owe a duty of disclosure to the insurer which includes your duty to make a fair presentation of the risk. Under Section 4 of the Insurance Act 2015 an Insured must disclose all material circumstances known to its Senior Management and those persons responsible for the Insured’s insurance.

A ‘fair presentation’ is one:
  • which clearly discloses in a manner that is reasonably clear and accessible, every material circumstance which is known or ought to be known by the Insured’s senior management, including persons responsible for the Insured’s insurance, following a reasonable search or which is sufficient to make the insurer ask questions about the risks associated to the presentation. A circumstance is material if it would influence an insurer’s judgment in determining whether to take the risk and, if so, on what terms. If you are in any doubt whether a circumstance is material we recommend that it should be disclosed;
  • which discloses information in a manner which is clear and accessible to a prudent insurer (i.e. ‘data dumping’ is not permissible)
  • all statements and facts disclosed on proposal forms, statement of facts, and other documents should be full, true and accurate and must be given after undertaking a reasonable search, including consulting with your senior management.
Failure to disclose a material circumstance may entitle an insurer to:
  • in some circumstances, avoid the policy from inception and in this event any valid claims under the policy would not be met;
  • impose different terms on the cover, including charging an additional premium; and/or
  • proportionately reduce the amount of any valid claim payable
This duty applies:
  • before the insurance policy is incepted;
  • when it is renewed; and
  • at any time that it is varied.

The policy wording may also provide that this duty continues for the duration of the policy.

You should contact us immediately for assistance if you are unsure whether information may be material, or if it comes to your attention that you may have not disclosed full and accurate information.

For these purposes, when submitting your information, please also provide a list of the positions /roles within your Firm that you consider to be your Firm’s Senior Management and include the roles of those persons responsible for the Firm’s insurances.

Terminology

Reasonably clear and accessible

All information must be provided to Insurers in a reasonably clear and accessible manner. This means that information must not be provided in an ambiguous way. This prevents key facts being concealed amongst large volumes of less relevant or immaterial information.

Material Circumstance

Is anything that would influence the judgement 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 it would typically include any factors pertaining to the risk to be insured, including prior claims, your financial history, qualifications of personnel, convictions of your personnel and your split of business activities.

Known or ought to be known

You are 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 a lack of enquiry or by “turning a blind eye”, you will have breached your duty to fairly present the risk.

Senior management

Your knowledge, for the purposes of the Act, includes (but is not limited to) that of all senior management. This includes individuals who play a significant role in the making of decisions on behalf of the business, even if they do not sit on the board or if they do not officially have a management role including outside third parties, consultants, advisors. No further guidance is given by the Act, so this is likely to depend on the circumstances and the management structure of individual insureds.

Those responsible for arranging the insurance

This includes your risk managers, your employees who assist in the collection of data or who negotiate your insurance with your broker. As a result a broker’s knowledge of a material circumstance can be imputed to an insured, even if an insured is itself unaware of it

Reasonable search

You are obliged to undertake a reasonable search. What is reasonable will depend upon the nature of your business and the policy you are purchasing. When considering the extent of your search, you should take into account the nature of the insurance you wish to purchase and who within your organisation is best placed to provide the relevant information.