The Insurance Act 2015 will go live on 12th August 2016 across England, Scotland and Wales, bringing a radical change to how commercial insurance claims will be treated, as well as changing the way you buy insurance for your electrical contracting business.
With insurers, such as ECIC already operating within the principles of the new law, it makes sense for you to understand what the changes are and how you stand to benefit if you need to make an insurance claim.
A new era in electrical contractors’ insurance
The good news is that under the new law, the onus will rest on insurers to analyse the risks they are being asked to accept and most importantly, to pay claims, as long as the risks have been fairly described. However, in turn, contractors will need to declare all information known by them, which may influence an insurer’s view of the risk.
Put simply, the new law focuses on what contractors need to disclose and also, what insurers need to ask you, in order to make the most accurate calculation of risk.
Currently, if a contractor fails to disclose information when the risk is being calculated, the insurer could use this as a reason to void the policy and avoid a claim completely.
Under the new Act, if a contractor deliberately chooses not to disclose information that later results in a claim, the insurer can still void the policy. So there’s no change if the non-disclosure was deliberate.
However, if there was an inadvertent non-disclosure, rather than voiding the policy, the insurer may reduce the amount of the claim settlement in proportion to the premium they would have actually charged had the circumstances been disclosed. If they would have imposed different terms or conditions, the insurer may treat the insurance contract as if those terms had applied from the date of the breach. And in circumstances where they would not have written the policy, insurers may treat the policy as void and the premium returned.
This means that a contractor who inadvertently fails to disclose relevant information or breaches a warranty will be in a much better position under the new Act, if they need to make a claim.
Understand your risks
It’s therefore vitally important that you understand and confirm the type of risks your business and your employees deal with. For some electrical firms, the risk will be fairly clear-cut, but the electrical contracting market has seen a huge amount of diversification and development in recent years. If you’re one of those companies that has entered new contracting areas, expanded your field of expertise or diversified into new markets, it is crucial you disclose this information to your insurer. Leave it to chance and you could find that your risk has been misunderstood and when you come to make a claim, the settlement may fall short of your expectations.
It makes sense for electrical contractors to start looking at their disclosure processes, such as record keeping of individuals responsible for arranging insurance cover, along with senior management who should be involved in any disclosures made. This information will support you if you need to make a claim. Brokers will also play an important role in helping you understand this process, but, ultimately, the responsibility for providing the right level of detail is yours.
Prepare your business now and welcome the new era of insurance for electrical contractors.