The Insurance Act 2015: Crucial Advice for Fleet Managers
Comment from Richard Brown, Managing Director at Licence Check
- Insurance Act of 2015 requires commercial insurance policyholders to make a ‘fair presentation of risk’ to their insurer
- Doesn’t apply to information the insurer should ‘reasonably know’
- LICENCECHECK looks at the consequences of this for fleet operators
“The insurance industry has been preparing itself for the most significant changes in commercial insurance for over a century” says LICENCECHECK’s Managing Director, Richard Brown, as he looks at what this means for fleet operators, and where companies can mitigate risks with accurate record keeping.
The Insurance Act 2015, which became law in February 2015 and comes into effect on 12 August this year, affects the information exchange between insurer and insured. The aim is to reduce the number of disputes and disruption caused by policy avoidances for non-disclosure, breaches of warranty and the growing problem of fraudulent claims. The new Act puts the duty on the commercial insurance policyholder to make a ‘fair presentation of the risk’ to their insurer, however, the precise boundaries of this obligation will be a matter for the courts to determine over time.
Guidance issued by the Chartered Institute for Insurance and companies such as Zurich Insurance suggests that the policyholder should tell the insurer about all “material facts” and should not misrepresent any material information.
A “material” fact for these purposes is any information that would (a) influence the decision about whether to offer insurance in the first place and (b) if so, the terms on which it would be provided (i.e. premiums, excess amounts, exclusions etc.).
Richard Brown says; “A complication is that the duty on a company to disclose material information does not apply where the insurer already knows this information, or ought reasonably to know it, or is presumed to know about it. In this case the policyholder is not obliged to volunteer the information themselves. Once again until the courts have re-drawn the boundaries of reasonable presumed knowledge, the full extent of this exception will remain uncertain. At this point in time, senior managers and those charged with effecting insurance on behalf of their company should err on the side of caution and provide reports and information even if they are unsure whether it is material or not to the insurance policy. It will then be the decision of the insurer to investigate this information in more detail should they consider it relevant.”
The most important point for fleet operators is that the obligation to disclose material information is now a corporate responsibility. Knowledge of issues that would influence an insurer in taking on a risk and setting the premium will include information known to the fleet manager and their staff as well as knowledge of senior management and anyone involved in setting insurance for the business. Robust information systems and communications within an organisation are critical. A failure to keep proper fleet records and providing inaccurate reports or information to brokers and insurers could, at best, lead to a reduction in a claim or penalty premium or, in the worst case, the point blank refusal of a claim and loss of premium.
Maintaining detailed fleet records and conscious attention to this detail will be of paramount importance once the legislation is in effect. Those organisations that can provide their brokers with the requisite information will not only save time and cost by avoiding further investigation, but could also benefit from lower premiums based on the documented risk profile where this evidence supports best practice behaviour.
Policyholders are not legally obliged to volunteer information that supports a diminished risk, but savings can be effected where they do so.
There is no specific guidance or legislative requirement about how information is to be collected or presented by the fleet operator. This will be a matter for the company and their broker/insurer to agree however it may be that in the case of the smaller fleet that a series of spreadsheets will suffice.
It’s worth bearing in mind that hosted services such as Licence Check’s DAVIS solution can also offer fleet operators of all sizes an easily managed fully functional fleet and grey fleet management solution at a competitive monthly rate. This can offer distinct advantages to users in the form of ease of use, functionality such as reminders and scheduling, the ability to manage the booking of pool vehicles centrally, as well as providing the detailed reporting evidence and risk profiling to support the policy application.
The latter can form part of a programme agreed with insurers or brokers to address identified driver risks and behaviours within the fleet to improve safety and reduce the number of claims in return for significant cost savings. DAVIS offers online driver assessment and training as a separate module for this very purpose.