Jersey and The Insurance Act 2015: practical changes for insurers to consider.

The 2015 Insurance Act (2015 Act) applies to all commercial contracts of insurance, and variations to existing contracts of insurance, from 12 August 2016 and introduces what the UK government has described as

• “the biggest reform to insurance contract law in more than a century”.

The Act is the result of a joint review by the Law Commission and Scottish Law Commission into insurance law. It introduces substantial changes to the laws governing

1. disclosure in non-consumer insurance contracts;
2. warranties and other contractual terms; and
3. insurers’ remedies for fraudulent claims.

The Act is seeking to create a new and fairer balance between insured and insurer and the Act applies to both insurance and reinsurance contracts – where ‘insurer’ and ‘insured’ are mentioned in this bulletin, the Act applies to ‘reinsurer’ and ‘reinsured’ in the same context, where applicable.

Jersey

Against the above matters and except for the Codes (shown below) being superseded by amended versions on 1 September 2016 the JFSC have been silent on any changed to the regulatory environment for GIMB service providers (that you are) in Jersey.

Please click here to view a track change version of each Code that is being amended.

1. Code of Practice for General Insurance Mediation Business – 1 September 2016 – track change version
2. Code of Practice for General Insurance Mediation Business – 1 September 2016 – clean version

This said the key issues in The Insurance Act 2015 that will have synergy with Jersey and its codes (as shown above) where there is the duty of fair representation and knowledge of the insured (sections 3 and 4 of the Act) – these matters are implicit within the principles and therefore the JFSC will look across at UK standards to benchmark their expectations.  With this in mind I suggest the key areas to consider are:-

1. The manner of disclosure –
   1. 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”.
   2. In particular, this will involve considering more structured presentations, with information more readily accessible and avoiding “data dumping”

1. Knowledge of the insured –
   1. An insured is deemed to know what “should reasonably have been revealed by a reasonable search of information available to the insured”.
   2. 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 and as trusted advisers brokers will need to work out how to support their clients in this respect

1. Timing –
   1. Due to the above requirements, this may well result in the need for a longer lead-in time prior to renewal

1. Liability –
   1. 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.
   2. 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

Against all these matters it may be the fact that Jersey firms can avoid the prescriptive approach to updating clients required in the UK but Comsure would recommend the changes are highlighted to clients where necessary and your client documentation (legal TCs etc.) updated accordingly and it goes without saying that your conduct of business processes are revisited in regards to these matters.

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