The Insurance Act 2015

The Insurance Act – What Businesses Need to Know

Changes to the Insurance ActThe Insurance Act, a piece of legislation designed to modernise and support the growth of Britain’s insurance industry, received Royal Assent on 12th February 2015, thus making it an Act of Parliament (law).

The Act ushers in a more modern regime for the industry by updating the 100-year-old regulations governing contracts between businesses and insurers. The government believes that updating the regulations will lend transparency to the industry and lower the number of legal disputes, better equipping UK insurers to survive against global competitors who have already adopted more modern regimes for governing insurance.

Watch our video below to find out how it affect you and your business:


The Act contains three main areas of reform:

1. Disclosure and Misrepresentation in Business Insurance Contracts

The Act will obligate business owners to disclose honest assessments of the potential risks associated with their particular businesses before entering into insurance contracts. This fair presentation of risk requires business owners to disclose information in a straightforward  and concise manner in order to minimise ambiguity and misunderstandings. In the event there is a breach of fair presentation, the Act provides remedies that could allow insurers to invalidate the policy, refuse all claims and keep the insured’s paid premiums.

What is a ‘fair presentation of risk?

(hover for descriptions) A fair presentation is one that discloses, in a manner that is reasonably clear and accessible, every material circumstance which is known or ought to be known by the business’s senior management, anyone else insured under the policy, and those responsible for arranging the insurance, following a reasonable search.

You do not have to disclose:

  • Information held by the insurer and accessible to the underwriter that is relevant to the risk
  • What an insurer writing this type of insurance would reasonably be expected to know
  • Common knowledge

2. Warranties

The Act abolishes ‘basis of the contract’ clauses, which automatically transform pre-contractual information supplied to insurers into a warranty. In the event that the insured breaches a warranty, the insurer’s liability is suspended. If insured parties can remedy the breach before a loss has occurred, their cover is reinstated. After a warranty has been breached, an insurer cannot decline continued cover if the business owner can provide proof that the breach did not increase the risk of loss.

3. Remedying Fraudulent Claims

If a business submits a fraudulent claim, the insurer has the option to terminate the contract at the time of the fraudulent act and, as such, is not responsible to pay the claim. If the insurer had distributed any funds to the owner prior to the discovery of the fraudulent claim, the insurer would be able to recover those payments. However, the insurer would remain liable for any genuine losses that the business experienced prior to the fraudulent claim.

Next Steps for Businesses

The Act’s reforms will go into effect from, 12th August 2016 and extends to every business insurance policy written in the United Kingdom (with certain exceptions). Be aware of how the reforms will affect your current contracts and what changes you need to make in the interim to stay prepared, compliant and successful.

If you have any questions…

Get in touch to find out more ➞

Aviva Customer Guide to The Insurance Act 2015

The Insurance Act 2015 & Enterprise Act 2016 – Customer Factsheet.

This short factsheet summarises the two Acts. Outlining the key concerns for customers including their ‘duty of fair presentation’, ‘reasonable search’ and ‘clear and accessible’ presentation of risk. It also has a helpful 7 step check list. – Download your free copy today >

Reasonably Clear and Accessible

This addresses the clarity of presentation and how able insurers are to assess the risk.  ‘Data dumping’ of large amounts of information without signposting is unacceptable.

There is also an additional requirement to adequately highlight unusual activities and/or known areas of concern that could affect the risk.


Senior Management

Senior management is defined in the Act as “individuals who play significant roles in making decisions about how the insured’s activities are to be managed or organised”.

Agreeing on a single workable definition is impossible because of the variation in types and size of businesses or the class of insurance.

The words to be are significant, implying a higher level of management or oversight than those managing or organising on a day to day basis.

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