Four months have passed since the Insurance Act became law in August. Too early for any major court decisions but, nonetheless, time enough for a few preliminary observations. Despite some initial doubts and wobbles, the market has largely taken the new law in its stride. Policies have been updated, training sessions have been provided and processes have been refreshed. Some have focused on gaining market advantage, whilst others have taken a more technical approach. As with all change some have adapted better than others. In some cases risk managers have been surprised at what their reasonable search revealed and underwriters by what their old policies contained. Generally however, more thought seems to have been given to the placement process and in addition, the better prepared brokers have examined their role, procedures and what liabilities they can assume.
The Insurance Act is principles based but the facts behind any disputes will be infinitely variable. Was the presentation fair, was the search for information reasonable, were individuals “senior management”, was the warranty a risk migration term or did it define the risk? All of these questions could give rise to new test litigation. If the Insurance Act follows CIDRA then the nature of disputes may alter too, moving away from misrepresentation and non-disclosure towards post-loss conditions, the extent of cover and the effect of policy terms.
We should expect some significant litigation over the next few years which will give further guidance to the market. However, many policies contain binding arbitration clauses which, as several senior judges have observed, hinder the development of the common law. The process may therefore take longer than would be ideal. Whatever the courts eventually decide whether the Law Commissions will have achieved their aims of improving practices to support the UK insurance industry abroad and assist its reputation at home may not be known for some time yet.
Written by David Hertzell, consultant