As the broking community gathers at BIBA this week, high on the agenda of discussion points will be the forthcoming Insurance Act implementation and what it means. As befits a one in a 100 year legal milestone, there is much uncertainty about the Act, what practical application will look like and, as a result, a degree of unease exists among brokers...
At the conference, QBE specialists are conducting ‘Act Labs’ on our stand where brokers can discuss the changes, the key elements they need to be aware of and what advice they should be giving to their clients. For those not able to attend the conference, here follows the major challenges we think the Act poses for the broking community.
The key issues relate to the duty of fair representation and knowledge of the insured (sections 3 and 4 of the Act).
- The manner of disclosure - Brokers will need to consider and advise clients on how to ensure that disclosure is made in a way “which would be reasonably clear and accessible to a prudent insurer”. In particular, this will involve considering more structured presentations, with information more readily accessible and avoiding “data dumping”
- Knowledge of the insured – An insured is deemed to know what “should reasonably have been revealed by a reasonable search of information available to the insured”. As a result, brokers will need to work with their clients to assist them in having adequate processes and procedures in place to be able to meet their duties. These and other risk management activities are not always well developed within organisations, and as trusted advisers brokers will need to work out how to support their clients in this respect
- Timing – Due to the above requirements, this may well result in the need for a longer lead-in time prior to renewal, so brokers will need to plan for this
- Liability – As a result of the revised duties on insureds under the Act, together with the fact that “information” includes information held by the broker, there is the potential for brokers to assume increased liability in connection with the information being provided. Consequently, in addition to clear communication as to what is expected in terms of the presentation, brokers may need to consider things such as clarifying roles/responsibilities/liability within their terms of business agreements with clients
- Cost – As the impact of the Act may place greater burdens on brokers in the performance of their role, there may potentially be cost implications. This provides an opportunity for brokers, on the basis of the enhanced value they are providing to their clients; however, it poses the challenge of brokers being able to be remunerated appropriately for the work done
The Act is a very positive development for the industry as it will address existing anomalies providing greater certainty and delivering positive outcomes for clients. The transition to the new legal framework undoubtedly presents challenges, and opportunities, for the industry and a better understanding of the changes will be to all parties’ benefit.
The Introductory Guide to the Insurance Act, produced by BIBA and Mactavish and supported by QBE, provides excellent direction for the industry. Download the guide here.