The Insurance Act 2015: What is your duty of fair presentation?

1. Aon UK Limited
Insurance Act 2015 - Fair Presentation
The Insurance Act 2015: What is the duty of fair presentation? 1
The Insurance Act 2015:
What is your duty of fair presentation?
In order to meet the duty of fair
presentation, you must:
 Disclose every material circumstance that you
know or ought to know, or sufficient
information to put the insurer on notice that it
needs to ask further questions to reveal those
material circumstances; and
 Make disclosure in a manner which would be
reasonably clear and accessible to a prudent
insurer; and
 Make sure that every material representation
as to a matter of fact is substantially correct,
and every material representation as to a
matter of expectation or belief is made in good
faith.
How does the new ‘duty to
provide sufficient information’
work?
This is not a new duty in its own right. It forms part
of the duty to disclose all material circumstances
and will only apply when you have tried but failed
to provide all material circumstances, and can
show that you have given the insurer a good base
from which to ask further questions.
Has the definition of ‘material
circumstances’ changed?
No, the definition of material circumstance stays
the same as under the current law i.e. a
circumstance (or representation) is material if it
would influence the judgement of a prudent insurer
in determining whether to take the risk and, if so,
on what terms.
Whose knowledge counts as
the ‘insured’s knowledge’?
If you are an insured who is an individual this will
be taken to include your own knowledge and the
knowledge of individuals responsible for your
insurance.
If you are an insured who is not an individual (such
as a company) this will be taken as what is known
to your senior management and the individuals
responsible for your insurance.
The Act describes senior management as “those
individuals who play significant roles in the making
of decisions about how the insured’s activities are
to be managed or organised.” It is intended to
cover the highest level of management of an entity
(for example, the board), but will vary as there is
no “one size fits all”. It will depend on your
organisation’s structure and management
arrangements.
The Act describes individuals responsible for the
insured’s insurance as “as individuals who
participate on behalf of the insured in the process
of procuring the insured’s insurance (whether the
individual does so as the insured’s employee or
agent, as an employee of the insured’s agent or in
any other capacity)”.
This definition is intended to catch all those
individuals who, for example, participate in the
insurance buying process, collate information
about the risk, and negotiate with insurers. These
people could be very junior and it isn’t limited to
people within your organisation, so would include
your broker. However, you won’t be taken to know
confidential information your broker has obtained
from another client or third party which is
unconnected with your insurance contract.

2. Aon UK Limited
Insurancer Act 2015 - Fair Presentation
The Insurance Act 2015: What is the duty of fair presentation? 2
What counts as ‘what the
insured ought to know’?
The Act states that you ought to know what would
have been revealed by a reasonable search of any
information which is available to you (whether the
search is conducted by making enquiries or by any
other means). This includes information held
within your organisation (which can include
persons in addition to senior management and
insurance procurement staff, if the knowledge they
hold is relevant to the insured risk) and by ‘any
other person’.
‘Any other person’ is intended to be interpreted
flexibly so is uncertain. It looks likely to include at
least your agents, individuals and entities that will
have cover under your contract of insurance,
outside advisers (including lawyers, accountants,
brokers and consultants), suppliers/service
providers, and outsourced service partners. What
will be regarded as a reasonable search will be
judged objectively (i.e. compared to other
businesses similar to yours) and will vary based on
the type, size, and complexity of your business.
The larger your business, the more thorough your
search will need to be. If you are only an
individual or small business you will still need to
review your records, speak with staff, and consult
outside advisers where relevant. The precise
meaning of a reasonable search is currently
uncertain. As such, make sure you discuss the
extent of your reasonable search with your broker.
You should also document the search you have
carried out.
What makes a presentation
‘clear and accessible’?
Information must be provided to the insurer in an
ordered, digestible way. This requirement is
designed to prevent, on the one hand, overly brief
or cryptic submissions and, on the other hand,
“data dumping” where the insurer is presented with
an overwhelming amount of undigested
information without any explanation or signposting
as to what is material. If the presentation isn’t
clear and accessible it could amount to a breach of
the duty of fair presentation in its own right.
What happens if I don’t provide
a fair presentation of the risk?
Where deliberate or reckless failure to provide a
fair presentation has occurred, insurers can avoid
the insurance from the date it was entered into or
varied. The insurer may retain any premiums paid.
A failure will be considered deliberate if it was
known that a fair presentation was not being
made. It will have been reckless if there was no
care as to whether or not the duty was breached.
Unless the specific terms of your insurance
contract put you in a better position than under the
Act, for any other breach (for example, an innocent
breach), the remedy will reflect what the insurer
would have done if the insured had made a fair
presentation of the risk:
 If the insurer would not have written the
insurance on any terms, then the insurer may
avoid the insurance contract, or variation, and
refuse all claims. The insurer must return the
premium.
 If the insurer would have written the insurance
but on different terms (other than premium),
the insurance contract will be treated as if
those different terms apply
 If the insurer would have charged a higher
premium, the insurer may proportionally
reduce any claim payment e.g. if the premium
charged is 75% of what the insurer would have
charged, the claim payment will be adjusted to
75% of the total claim.
For more detailed guidance on any of these
points, please speak to your usual Aon
contact.
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