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The Insurance Act: Do you know your DoD from your DoFP?

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The UK Insurance Act 2015 comes into force in August 2016 – but how many Risk Managers recognise the significant impact on day-to-day operations? Duty of Disclosure (DoD) is so ingrained in daily processes for Risk Managers there is the assumption that Duty of Fair Presentation (DoFP) may not be that different – this is a misunderstanding which should be remedied sooner rather than later.

The Act represents a considerable change in focus and legal requirement, so much so that DoD will no longer apply. The new requirement of DoFP demands that there is reasonable search with demonstrable processes for attaining all relevant evidence to a sufficient legal standard prior to making market presentation and that relevant risk information is specifically highlighted to underwriters within the presentation. As well as this, the Act applies to all insurance which is written in the UK – wherever the insured is located – both US and European companies need to be prepared for the change.

Change is a’ coming

The replacement of the DoD with DoFP is a significant change for Risk Managers. Under this new duty, insureds must provide all information ‘in a manner which would be reasonably clear and accessible to a prudent underwriter’.

But what does this mean in practice?

Changes to data presentation mean that information and data must be presented in a logical and coherent format and material points must be actively highlighted. Reasonable search must be taken into account and insureds must demonstrate that all relevant information has been provided from anyone, including management, who ‘ought’ to have insight. Data dumping is no longer an option, meaning that Risk Managers cannot dump reams of data as “job done”.

In order to achieve all of this, technology is essential to ensure you are tracking the way in which information is collected and collated.

Meeting the change

Traditional processes used to support DoD are no longer adequate in the more demanding era of DoFP. At present, data is being collected via ad hoc processes. Conversations and emails are being relied upon to record information, as are multiple spreadsheets.

These processes mean that information cannot be easily consolidated and aggregated to present a clear set of statistics, and there is no way to link to supporting documents.

In order to meet the change of the Insurance Act, Risk Managers need to consider whether they have:

  • The clear audit trail for evidence and compliance verification.
  • Proof that the right people have been asked the right questions.
  • Verification that all the information that ‘ought’ to be known by managers has been provided.
  • Confidence that all material data has been both collected and specifically highlighted to the market.

The potential consequences of non-compliance with the Insurance Act are significant. To find out more about how you could be affected click here to download our eBook.

Download Preparing for the Insurance Act 2015 Guide

May 16, 2016

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