New Insurance Act gives businesses better protection

12th February 2015

The British Insurance Brokers’ Association (BIBA) has welcomed the Insurance Act which has today received Royal Assent. BIBA is also delighted that clause 11 ‘Terms not relevant to the actual loss’ was reintroduced. When BIBA gave evidence at the House of Lords in December 2014, the clause was not included and the key point BIBA lobbied for was the inclusion of this important clause.


Graeme Trudgill, BIBA’s Executive Director, said: “BIBA is extremely pleased that the Bill has received Royal Assent before the election. This is good news for business customers and with clause 11, it means that insurers will be obliged to pay claims when a breach of a policy term is totally irrelevant to the loss that has taken place, unless of course it defines the risk as a whole.”


In additional to clause 11, there are a number of other key areas that will be modernised for the benefit of policyholders. The Act abolishes Basis of Contract clauses which previously had the effect of converting pre-contractual information supplied to insurers into warranties that must be complied with.


It also improves the situation where a warranty breach that is remedied quickly enables cover to continue from the date of the remedy (rather than the policy being voided).


The duty of fair presentation improves the existing duty on non-consumer policyholders to disclose information to insurers before entering into the contract and introduces a term “duty of fair presentation”. This requires policyholders to undertake a reasonable search of information available to them and defines what a policyholder ought to know along with providing proportionate remedies where the duty has been breached (except where the breach was reckless or deliberate). This replaces the previous remedy of avoidance of the contract.


Law Commissioner, David Hertzell, said: “I am delighted that this Bill has received Royal Assent.  It embodies the enormous efforts of much of the market to update the UK’s old insurance laws.  I am grateful for all the time that BIBA has devoted to this task.  The new Act is the better for it.”


Graham Terrell, Deputy Chairman of BIBA’s Liability and Accident Committee and Technical Specialist at JLT, commented: “The Act is important as it reflects the commercial world today and addresses the needs of the modern renewal and placement process faced by brokers and their business customers. We believe that this is in the customers’ best interests.”


Steve White, BIBA’s Chief Executive, said: “To achieve one of BIBA’s Manifesto points so early in the year is great news for members and their customers. Congratulations to David Hertzell and the Law Commission for all of their hard work.”


The Act will be implemented in 18 months and BIBA is producing a comprehensive guide for insurance brokers to be launched at a fringe session at the BIBA Conference in Manchester on 13 May. This will tackle the complex areas of fair presentation and reasonable search.




Notes to editors

1. For further information please contact:

BIBA press office:
Leighann Forsyth, Head of Communications
020 7397 0223
[email protected] 

2. The explanatory notes for the Act can be found here

3. About British Insurance Brokers' Association

The British Insurance Brokers' Association (BIBA) is the UK's leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers.

BIBA membership includes just under 2,000 regulated firms having merged with the Institute of Insurance Brokers (IIB) in November 2011.

General insurance brokers contribute 1% of GDP to the UK economy and BIBA brokers employ more than 100,000 staff.

54% of all general insurance is sold by an insurance broker and they arrange 79% of all commercial insurance business.

Insurance brokers put the client’s interests first, providing advice, access to suitable insurance protection and risk management.

BIBA helps more than 400,000 people a year to access insurance protection through its Find a Broker service, both online and via the telephone.

BIBA is the voice of the industry advising members, the regulators, consumer bodies and other stakeholders on key insurance issues.