Discussions with Airmic members indicate that one of their biggest concerns about the Insurance Act relates to the requirement to be “clear and accessible”. Charles van Oppen of TBIAS examines what it might mean in practice.
Some of you might find it ironic that lawyers are giving us lessons in plain English. Being “clear and accessible” sounds like a quality required of any insurance professional and would no doubt be included on any business communications course worth its salt, but that is exactly what The Law Commission intended to address. They reviewed many insurance disclosure submissions and found deficient standards of presentation. This deficiency added uncertainty to the insurance contract.
In particular the Law aims to target bad practices of data dumping, where the insurer is presented with an overwhelming amount of indigestible information, and, at the other end of the scale, being overly brief or cryptic (Insurance Bill Explanatory Notes). Many insureds invest in collecting insurance-risk data and then stumble at the last hurdle by failing to present this data into meaningful charts and tables, and explain trends.
The Insurance Act endeavours to make insurance contracts more certain to insureds and rebalance the relationship between insurers and insureds by replacing the single existing remedy of avoidance with a fairer system of proportionate remedies. Under the new system, it is therefore important to define boundaries of ‘fair presentation of the risk’ so that insureds know what constitutes a fair presentation. The new Act stipulates that, among other things, a fair presentation of the risk is one which makes that disclosure in a manner which would be reasonably clear and accessible to a prudent insurer (Insurance Act, Section 3.3.b).
A ‘clear and accessible’ insurance presentation should fulfil the mandate of being a fair presentation of risk, while successfully supporting the insured in obtaining optimum insurance cover at the best possible price. Notwithstanding the difficult task of deciding what content to include and/or exclude, it should be understood that providing realms of detailed data is not in itself data dumping; the nub of the ‘clear and accessible’ matter is about presentation.
Insureds should not be put off using Data Rooms or online submissions, which if properly managed provide a clear, accessible and auditable way of providing disclosure data to an agreed list of insurers. However, they are open to misuse unless they have active content management.
A fair presentation (which need not be one document or oral presentation) should tell underwriters the story of the risk. It should organise the content so that the insurer can easily find the important messages, changes etc. and can find aspects of the risk via well labelled and numbered pages and/or supporting documents. Use plain English, avoid jargon and be factual. It should also be peer reviewed and proof read. I would recommend remaining entirely factual and cognisant of the fact that the Daily Mail might see it one day!
Don’t forget the presentation is fundamentally the responsibility of the insured. Historically, brokers have often taken on the role of producing insurance presentations, but they will invariably require the insured’s sign-off. Don’t be persuaded to hide or dumb down aspects of the risk that are less desirable to insurers.
The Act does not change the test of materiality so Insureds face the ongoing dilemma of what constitutes enough detail. Opening a line of enquiry on one area of disclosure often makes another area appear conspicuously brief, and of course it is invariably the contentious subjects that deserve the most explanation. Top law firm Herbert Smith Freehills recommend, ‘if in doubt spell it out’.
Charles Van Oppen is a consultant at TBIAS
For more tips see “Tips on how to make your insurance presentation clear and accessible” (Appendix 3, Airmic’s Guide 2016, Guide to fair presentation, Insurance Act 2015).
Charles van Oppen