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About Sam Leeder and Paul Taylor of Actus Insurance, Sheffield

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Be sure to avoid the horror of an unpaid claim!

Oct 21, 2019

The introduction of The Insurance Act in 2016 further complicated the murky area of insurance disclosure. The act did provide additional protections on warranties and conditions, but also imposed an ongoing duty to the policyholder - that of “fair presentation of risk.” In simple terms, this means that the policyholder has an obligation to the insurer to provide material information regarding the insurance, whether predating the period of cover or occurring during the policy period.

We have found that larger businesses with their extensive management teams tend to provide information to brokers, who in turn pass it on to insurers, as part of their procurement process. On the flip side, with owner-managed or family-run businesses, we find that insurance is often dealt with on a needs-must basis and there are occasions where information that should be disclosed can be unintentionally missed.

One area we find to be most commonly omitted regards the past trading history of owners.

There’s a variety of reasons for previous business failure, whether related to bad debts, ideas not catching on or lack of planning all of which can have a material impact upon insurance premiums.

What is lesser known perhaps, is that insurers tend to do background checks on directors to check whether they have previously had involvement with a liquidated business and whether any debts have been left as a result.  On other occasions, insurers will rely upon a Statement of Fact - a document you are supposed to check thoroughly - which, as standard, will state that you’ve not had issues in the past even if you have unless you disclose otherwise.

If you do wind up in a situation where you need to make a claim within the business, there is a high likelihood of a Loss Adjuster asking for confirmation that you’ve provided accurate information on the business, and in particular on your own past trading history.

If this Statement of Fact has not been completed accurately - whether intentionally or not - the claims process will not be straightforward. An underwriter will be involved to advise whether or not they would have quoted for the business if they had received accurate information prior to inception.

Not only could this result in your claim not being paid, but it could even mean the policy is cancelled.

Our advice would be to discuss your insurances in depth with a broker, well in advance of your renewal date to ensure that you have sufficient time to provide an accurate picture of you and your business and allow you the opportunity to check thoroughly all documentation. This way, you can be sure your insurance has been arranged on the correct basis and the horror of rejected claims and cancelled policies can be easily avoided.

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