Our columnist shares how to avoid being spooked by an insurance horror
Avoiding the horror of an unpaid claim!
The issue of insurance disclosure has always been something of an issue, however this was further complicated by the introduction of The Insurance Act in 2016.
Whilst this act gave consumers additional protections in respect of warranties and conditions, it also imposes an ongoing duty of ‘fair presentation of risk’ on the policyholder to declare anything that is material to the insurance, anything the policyholder ought to have known about and anything that comes to light during the policy period.
In my experience, large businesses who have extensive management teams take the care to provide lots of information to insurers via their broker as part of their procurement process. In the world of the owner-managed or family-run business, insurance is often dealt with on a needs-must basis and things that possibly should be disclosed can be unintentionally omitted.
One of the biggest areas we find this to be an issue is with the past trading history of business owners. As we all know, starting or growing a business is particularly challenging even when you’ve had experience of it in the past. Businesses close for a variety of reasons, whether down to an idea not quite catching on or because of bad debts – this is a natural part of business life.
What many people don’t know is that insurers tend to do background checks on directors to find out if they’ve previously had businesses liquidated and whether any debts have been left. Alternatively they rely on a declaration tucked away in a Statement of Fact, that you are supposed to read, stating that you’ve not had issues, even if you have.
If you do have an incident occur within the business which you may need to claim for, one of the first things a loss adjuster may ask for is confirmation that you’ve provided accurate information on the business and in particular on past trading history.
If the questions have not been answered correctly – unintentionally or not – the claims process will not be straightforward. The situation will need to be referred to an underwriter who may decide that they would not have quoted for the business if they had full knowledge of the details.
This could result in a claim not being paid or even the policy being cancelled.
Our advice therefore would always be to discuss your insurances in depth with a broker who takes the time to get to know you and understands your business. That way insurances can be arranged on the correct basis and the horror of a claim not being paid can be avoided at the first hurdle.
If you would like to know more please don’t hesitate to get in touch.