Insurance Act: Benefit from our approach
- The Insurance Act 2015 (the ‘Act’) comes into force on 12 August 2016 and will apply to all Commercial non-life insurance policies
- A key aim is to ensure better exchange of information between insurers and customers
- All of our policies will be interpreted in accordance with the provisions of the Act, except when we apply our ‘additional premium approach’, which is an opt-out from the Act for the benefit of our customers
What is proportionate settlement?
The Insurance Act 2015 introduces a new ‘duty of fair presentation’ and clarifies what you must disclose to an insurer and what an insurer ought to know about you.
Under the Act, if you fail to make a fair presentation, which is not deliberate or reckless and where the insurer would have charged additional premium if it had been aware of the relevant material facts, the insurer has the right to reduce the amount to be paid on any claim during the period of cover in proportion to the amount of premium that would have been charged.
This remedy is referred to as ‘proportionate reduction of claim’ or ‘proportional settlement’.
Giving you total confidence
We are taking a different approach to The Insurance Act 2015 which we believe will benefit you.
Where a non‐deliberate or non‐reckless non‐disclosure would have resulted in us charging an additional premium if the risk had been fairly presented, we will settle the claim(s) in full and charge you that additional premium. This will give you total confidence that we will pay your claim(s).
Charging additional premium is not a right that is provided for by the Act. We believe that our additional premium approach should, in most situations, be more favourable to you when compared to the proportionate reduction of claim approach under the Act.
For example, if the proportionate reduction in claim remedy was applied to a £5m claim where the premium underpayment was £10,000 (representing 50% of the insured premium), your claim would be reduced by 50% (i.e. £2.5m). Previous and subsequent claims will also be reduced in the same manner, leaving you with reduced cover.
Under our additional premium remedy, we would pay the claim in full and recover underpayments to premium. Accordingly, we would charge you an additional £10,000 in premium and pay the £5m claim (and any subsequent claims) in full.
- Proportionate reduction in claim: (10,000/20,000) * £5m = £2.5m paid on claim
- Zurich’s additional premium approach: £5m claim paid with an additional premium charge of £10,000
Our additional premium approach does not prejudice our rights to apply the other remedies provided under the Act for failure by you to make a fair presentation of the risk.