UK Insurance Act 2015 In Force

The Insurance Act 2015 (the "Act") has come into force on 12 August 2016, marking the most significant reform of the UK insurance law. This Act applies to all insurance policies entered into on or after 12 August 2016, including renewals, and to variations to existing policies made on or after that date.

The past century has witnessed apparent injustice created by some rigorous rules in the outdated insurance law, and its incompatibility with the modern commercial practice. This article summarizes the major changes to the UK insurance law regime brought about by the Act that readers may find useful.

1. Duty of Fair Presentation

   The Act replaces the duty of "utmost good faith" ("Uberrima fides") by the duty of "fair presentation" of the insured. This requires the insured to (i) disclose "every material circumstance" which the insured knows or ought to know, and (ii) provide the insurer with "sufficient information" to put a prudent insurer on notice that it needs to make further enquiries. The requirement of "ought to know" requires the insured to know what should reasonably have been revealed by a "reasonable search of information" available to the insured, including a search for information held within the insured's organization, by its agent or by person covered by the insurance policy.

   This change justifies a more active role of insurers to assess the risks they underwrite, including directing the insured's "reasonable search of information", or outline particular or potential risks to the insured, who would then be aware of what the insurer considers to be material to the relevant risk.

   Notwithstanding the interpretation of "ought to know", there may be issues between parties to the insurance policy as to the extent of a "reasonable search for information", which may create disputes in future.

2. New Remedies for Breach of the Duty of Fair Presentation

   Insurers are no longer entitled to avoid the entire policy where there is a failure by the insured to disclose all material information.

   An insurer will only be entitled to avoid the entire policy and refuse all claims without returning the premiums paid where the breach of the duty of fair presentation is deliberate or reckless. Where the insurer is unable to show any deliberate or reckless intent, but can show that it would not have entered into the contract on any terms in the absence of such breach, it can avoid the entire policy and refuse all claims, but the premium paid must be...