Are you renewing your insurance soon? Some changes to watch out for.

 As well as the general market conditions, claims experience and more forms to fill in for your insurance renewal then if you are renewing insurances now then look out for 2 changes :

Firstly , Insurance Premium Tax (IPT) has increased from an original 2.5% back in 1994 to a steady 6% up to 2015 but more recently this increased to 9.5% (November 2015) and then 10% (October 2016).   A further increase to 12% is planned in June this year which represents a doubling of the rate in less than 2 years. 

Will the rate increase further such as Germany which charges 19% or perhaps the government will bring in line with the VAT rate of 20% ? What impact will Brexit have on this?

Secondly, under the Insurance Act 2015, for risks incepting on or after 12 August 2016 you will have a duty to make “a fair representation of the risk”. To meet this duty you still need to disclose all material information to insurers which is known to you (or which ought to be known to you). But also under the Act you "ought to know" what should reasonably have been revealed by a reasonable search for information held internally or externally (including by any third parties to whom services are outsourced etc). You must ensure you make a full written record of the search made and the responses provided to ensure that you have evidence in the event of any claim being made.  So documenting what you have done is key.

 Under the Act, in the event that there is a breach of duty to make a fair presentation of the risk, the remedies available to insurers will vary dependent on whether the breach is deliberate or reckless or otherwise. For deliberate or reckless breaches the insurer may avoid the contract, refuse all claims and retain the premium paid.  For other, non-fraudulent or non-reckless breaches the remedy will depend on what the insurer would have done had a fair presentation of the risk been made. If the insurer would not have accepted the risk he can avoid the contract but must refund premiums paid.  If the insurer would have accepted the risk on other terms the contract  is to be treated as if those terms applied, in the event that a higher premium would have been charged any claims payments can be reduced proportionately.

The purpose of the Insurance Act changes was to clarify the position and make sure policyholders are not treated unfairly by insurers if a warranty or condition is breached and they repudiate a claim. The responsibility is on the person of knowledge (which is usually the Finance Director) to disclose all relevant information and to make enquiries within their organisation to ensure that they are in a position to know all of the relevant information. This is quite onerous for the person of knowledge (FD) since it is them who have to sign off the information which goes to Insurers at renewal.