What the Insurance ACT 2015 means for you and your business (Part 1: Warranties)

The Insurance Act 2015 has been hailed by the government as “the biggest reform to insurance contract law in more than a century”.

But what does it mean for you and your business?

Well there are two main areas you should be aware of where you might need to change your business practices.

This post covers the first, which is with regard warranties on your insurance policy.

Changes to the law on Warranties

When an Insurer places a specific condition of cover on your policy, it is often known as a ‘warranty’.

In insurance (under the existing 1906 law), if the warranty on your policy is not complied with, then the cover will not stand. Even if say, you are claiming for water damage and your warranty requires you to upgrade your burglar alarm.

Fortunately, the Insurance ACT 2015 brings in some much needed changes to warranties.

Under the 2015 reforms, warranties will only allow the insurer to refuse payment if the claim is directly relevant to the warranty breached.

So using the previous example, if you were making a claim for water damage from flooding and hadn’t fixed your burglar alarm as required by the warranty, then you would most likely still be covered for the water damage.

Also, your cover will now only be void for instances that occurred at a time when you were in breach.

A word of warning, the act doesn’t fully come into force until the 12th August 2016. So you could still be subject to the 1906 ruling until then. You can contact Darren Quinn at Lothian Insurance Brokers if you are unsure.

What does this mean for your business?

This allows businesses to take more informed operational decisions, knowing that if they are in breach of a warranty for a short period of time, it won’t have an effect on cover for unrelated instances, or claims concerning events that took place whilst the warranty was being complied with.

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