Scots companies ‘remain unaware’ of imminent changes in new Insurance Act

On August 12 this year, the Insurance Act 2015 comes into force, making major changes to legislation which has been the bedrock of the UK insurance industry since it was enacted in 1906.

The measure contains significant changes to the legal framework of insurance contracts and it is of immediate importance to everyone involved in the insurance industry, which plays an essential part in the UK’s economic strength, managing assets of around £1.9 trillion.

However, Gordon Duncan, partner and head of corporate at Lockton’s Corporate Scotland, said that many firms have never heard of the legislative change or know what to do about it. He said SMEs were particularly uninformed, though he had had discussions with large private corporates which were similarly unaware.

Mr Duncan said: “The changes to insurance law are nearly upon us and nobody involved in the industry can be complacent about their implications. Business owners, senior management and other stakeholders have to take steps now to make sure their policies will still be effective.”

The main components of the new act are: the duty of fair presentation of the risk; remedies for the breach of the duty of fair presentation; warranties and other terms; contracting out; and the abolition of basis clauses.

The new act arises from the Law Commission’s conclusion that existing law is out of step with the current realities of commercial practice. It makes wide-ranging reforms to the law relating to non-consumer insurance contracts.

Mr Duncan said: “It is a matter of some concern that so many companies seem unaware of this major legislative change. 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.”