Have You Got to Grips with the Insurance Act 2015?
What are common cases you are instructed on as an expert witness?
As an ex insurance broker, commencing a career in 1970 my principal expert engagements concern broking and insurance market practice.
When insurance fails to pay out, the consequences for the business or individual can be life-changing. Typically, there are two principal remedies available to a policyholder; to sue the underwriter or, if there is one, the broker. The choice of which is usually made at the outset of instructions from the client but until a considerable amount of research and investigation has taken place it is often difficult to know the prospects of success. The benefits of early expert evaluation should not be underestimated because to an expert practitioner there are very often clues as to the underlying reason for the rejection of cover, and the antidote, that are not otherwise evident.
Whilst the policy is the evidence of the contract, it does not tell the full the story about the underlying transaction. The process by which insurance is arranged can have a significant bearing on the arguments that can be advanced in the insurance dispute. Analysing the “audit trail” of the transactional process, can, with the insurance expert’s eye, lead to startling revelations helpful (or not) to the case against the underwriter or broker. Either way it is better to know, early.
Why are these cases so common and what do you think companies could do in order to reduce the risk of them occurring?
The most common reason for insurance dissatisfaction arises from underinsurance; the “sums insured”1 being, very often, considerably lower than the value at risk. The reason for that is at the root of the causes of insurance disputes, generally. It is the quality of dissemination by the policyholder or its agent (broker) of information “material to the risk”. It is a universal truism that buyers resent the purchase, the cost and the stress of dealing with insurance matters. There is, sadly, an overarching mistrust of insurance and this leads to the temptation to be economical with the truth about “the risk” at the time of proposing for cover. Insurers are of course well aware of this and so are inclined to rigorously examine the facts at the time of a claim to compare them with the facts disclosed, originally.
The new insurance Act 2015 goes a long way towards protecting the policyholder from the worst of the old, often unreasonable insurance practices, but the headline provision of the Act and the very essence of the contract is the Duty of Fair Presentation (of the Risk). This duty is described in the Act for the first time in the history of insurance and, ironically it can create more problems for the Proposer, than apparent at first sight. Expert insurance practitioners will usually know “the norms” of what is material or not in any given situation.
How has the insurance industry changed over the years? How has this affected your clients?
The insurance industry has changed beyond recognition from its state in the mid 1980s to 1990s when a large body of insurance-related case law emerged. Technology has replaced human capital to a large extent and so there is considerably less lifetime-career experience in the industry than there once was. Insurance, with the advent of modern technology became a “numbers game” where the algorithms of actuarial dissection of past history determines, to a large extent the insurance contract offerings and terms of today. So, when something of the insurance “does not work” there are fewer people to say what was intended. This creating new methods of evaluating insurance claims and claim disputes.
FCA Regulation of insurance has also helped, to some extent, in framing the boundaries for insurance contracts. The overarching principle that an insurance should not be mis-sold and should meet the buyer’s demands and needs gives rise to the question “what was the policy intended to do – which would meet the policyholders demands and needs”? The expert eye will notice when a policy interpretation cannot make sense in the absence of the test “could you have sold it if that term was understood by the policyholder to mean that”?
There are very early signs of insurance disputes arising under the provisions of the 2015 Act and it is already evident that the industry is struggling in getting to grips with the new law. Attention to detail by the expert is paramount.
Flaxmans Chairman Roger Flaxman
ACII, MAE, Chartered Insurance Practitioner, CEDR-accredited Mediator
34 Lime Street
London
EC3M 7AT
www.flaxmanpartners.co.uk
With more than 40 years’ experience in the insurance industry, Roger Flaxman, a member of the Academy of Experts and ACII Chartered Insurance Practitioner, has more than a decade’s experience serving as an expert witness in matters of insurance practice, duty of care and insurance market procedure.
Flaxmans are insurance advocates specialising in commercial and business insurance advice.
Flaxmans is highly regarded and recognised throughout the industry and our level of service and expertise is reflected in the considerable success rate for our clients. As professionals we charge fees for our services which invariably are covered through the successful claims outcome. Prior to embarking on a case we always ensure our clients are aware of the fees involved and the prospects of success and costs benefit ratio.
Our skills include insurance law and practice, insurance claims advocacy, claim negotiation, litigation support, mediation and management of distressed business risk and loss adjusting mediation and settlement.
