Brokers will favour insurers that honour Insurance Bill - BIBA

Brokers will favour insurers who abide by the terms of the Insurance Bill now rather than waiting for it to become law, according to a senior spokesman for BIBA.

Graham Terrell, deputy chair of the BIBA casualty and accident committee, gave evidence on the Insurance Bill to the House of Lords in December. The Bill has been strongly endorsed by Airmic as giving buyers protection and increasing the efficacy and dependability of insurance policies.

Terrell, who is also casualty technical specialist at JLT, has worked closely with the Law Commission in the drafting of the Bill. He spoke to Jessica Titherington about the proposed changes and the battles still to be won.

Jessica Titherington: Will you favour those insurers that apply the law even before it is enforced?

Graham Terrell: Yes. Speaking with my JLT hat on, I’m confident that we will be pushing for insurers to accept and to agree to its terms prior to Sept 2016 [when it is likely to be enforced after a period of transition]. What has been agreed should be very clear by then and we would expect the market to honour it accordingly. I hope the market will be receptive. The initial signs are optimistic with the promises that insurers are already making in the press. It is certainly in their commercial interest to do so.

JT: Will the Bill impact the international competiveness of the UK and London insurance market?

GT: I think it can only be a positive for the UK as it addresses a number of glaring and archaic imbalances between the rights of the insured on the one hand and the right of the insurers on the other. Any advantages that insurers can use to show that the terms of business for commercial buyers are fairer in some way can only serve to be a good thing.

JT: BIBA, the British Insurance Brokers Association,is an advocate of the Insurance Bill in its current form, but has pushed for the reinstating of clause 11 concerning irrelevant warranties. Why is that?

GT: As it stands, a breach of warranty that in practice has nothing to do with the claim can, legally speaking, lead to the claim being avoided by the insurer even though it’s entirely unrelated to the breach. This is absolutely unfair and so we called for the clause in its reworded version to be reinstated.

JT: Why has there been resistance to this clause in some parts of the market?

GT: People are inherently cautious about change. Some are concerned because the current positon has the benefit of being very clear and straightforward: any breach of warranty leads to an automatic right to avoid a claim. When you bring in the issue of causation, you inevitably bring in the possibility of arguments on both sides about what caused the breach and to what extent.

However, in our view, you have to balance that against simple commercial fairness. At the end of the day the insurance buyer is the customer: they have bought into a promise that the insurer will pay the claim should certain circumstances happen. The mere fact that a totally irrelevant warranty has been breached should not be used as an excuse not to pay an otherwise perfectly valid claim.

JT: If the law in its final form does not address all concerns of buyers, will you encourage redressing this through contract wording?

GT: Yes absolutely. I think Airmic and BIBA have a strong commercial bargaining position to try and push for as many positive amendments within the Bill as far as possible. The open and constructive discussion with the Law Commission has resulted in a very good opportunity for that even, for example, in the unwelcome event that clause 11 isn’t reinstated.

How possible that will be will have to be assessed on a case-by-case basis. Ultimately, it’s a matter of commercial negotiation but buyers are now in a good position and insurers know that an amount of commercial goodwill will be obtained

Graham Terrell - BIBA