what has changed & need to know? ~ Insurance Academy

The application of British jurisdiction and law is still an important fact that (must) be agreed upon by the parties involved in the insurance contract.

Not only in practice, in theory too, aspects of English law are still one of the topics that must be studied by insurance practitioners because the reference book is the “Marine Insurance Act 1906”.

Although the name of this (old) law bears the word “marine” but the concept generally applies to all “classes of business”.

This old law is considered to be “seriously out of date” so that it requires interested parties in the UK to reform the Act.

In short, the results of the 1906 MIA reform have now become a new law resulting from the legislation process under the name “Insurance Act 2015”.

The “Insurance Act 2015” has been released since February 12, 2015 and will come into force from August 12, 2016 for all insurance contracts. This Insurance Bill was first introduced in Parliament on 17 July 2014.

This new law is the result of a joint evaluation by the UK Law Commission and the Scottish Law Commission in terms of insurance law. MIA 1906 by the Law Commission was considered too “insurer-friendly” and the restrictions for the insurer to be able to avoid liability were too broad.

By the British government, this new law is referred to as “the biggest reform to insurance contract law in more than a century”.

This new law is designed to provide a more “up to date” framework for commercial insurance with the aim of:

“at ensuring a better balance of interests between policyholders and insurers”.

So that it is hoped that transparency and certainty will be achieved on the rules governing commercial contracts between policyholders and insurers.

This Act introduces several substantial changes & in lieu of the Marine Insurance Act (MIA) 1906 which applies to commercial policies, both “marine” and “non marine”.

Of the many reviews by experts or observers or legal practitioners from various points of view, the author tries to summarize a few easy-to-understand explanations, namely:

“Disclosure”

The new law replaces the obligation to disclose “duty of disclosure” by the insured with the requirement that the insured must make a “fair presentation of the risk”.

This means that the insurer no longer has the right to cancel the insurance contract if there is a violation of the “duty of utmost good faith” doctrine.

Brokers, who act on behalf of the insured’s interests are also no longer subject to the old rules of “duty of disclosure”.

“Warranty”

Under applicable law, a breach of the “warranty” will relieve the insurer from all liability under the insurance contract, even if the breach is trivial and unrelated to the claim made by the insured.

Under the new law, the insurer cannot rely on a breach of the “warranty” unless it relates to a claim.

In fact the “warranty” will have such a suspension effect that the insurer can only depend on the “warranty” that is violated by the insured. The insurer will return “on risk” if the violation has been corrected/corrected.

“Remedy” for the insurer in the event of “fraudulent claims”.

If according to MIA 1906 in the event of “fraud” the insured can lose all claims & the insurer can cancel the entire contract, but according to the new law the insurer cannot be held responsible for claims related to “fraud” and can ask the insured to return the amount already paid for the claim related to “fraud” and terminate the contract since the occurrence of “fraud” and withhold premiums.

It is also important to note that this 2015 law distinguishes between “consumer insurance contracts” and “non-consumer insurance contracts”.

However, this new law still needs time to be proven in court in order to get a better understanding of how this law is interpreted and applied in different cases.

Insurance Act 2015

(Compiled from various sources)

By Novy Rachmat – Marine Insurance Practitioner

Email : novy.rachmat@kbru.co.id

Email : novy.rachmat@gmail.com