Seize the moment

There is no need to allow Basis clauses to be included in insurance contracts, following recent actions taken by Airmic to have them neutralised. Insurance buyers have a golden opportunity to insist that they are excluded or never produced in the first place, according to the association.

At the annual conference in June Airmic published a guide to Basis clauses, including some model wording for insertion into agreements. This would have the effect of rendering the clauses ineffective.

Since then several leading insurers have said, either formally or informally, that they back the initiative. Those to have publicly distanced themselves from the clauses include AXA Corporate Solutions, XL Group, AIG and ACE, whilst the Lloyd’s market Association has supported Airmic’s position in principle.

Leading brokers have also expressed support. According to George Davies, Chief Client Officer in Europe for Marsh, the broker is also looking to remove basis clauses in both proposal forms and wordings where they exist, and has been doing so for some time. “Where insurers remain reluctant to remove them, we are attempting to introduce appropriate policy language to significantly restrict their application,” he told Commercial Risk Europe.

Basis clauses, which have been described as ‘silent killers’, make it possible to avoid paying claims if the insured has made any inaccuracy when buying the policy. This can be something as trivial and irrelevant to the loss as a misspelt name. (See Airmic News, July 2013). The Law Commission have already criticised the practice.

“We have been very heartened by the strong level of support for our initiative from insurers,” said Airmic technical director Paul Hopkin. “There is a wide recognition that Basis clauses are an unfair relic from a by-gone age. It is now up to our members to seize this opportunity – they are in a great position to insist that Basis clauses are removed.”

A recent Airmic survey found Basis clauses to be a top concern of a third of the membership. The guide and Airmic model wording, drawn up by law firm Herbert Smith Freehills, can be downloaded from www.airmic.com

Paul Hopkin : “insist that Basis clauses are removed”