Chapter 3 Fifty Shades of Law A FAIR REPRESENTATION


Why is it important


Whether we are beginning the process of obtaining quotations for you for professional indemnity insurance or obtaining renewal terms from insurers on your behalf, we will request the completion of either a proposal form or renewal declaration. Both these forms request comprehensive information including details of your business activities, qualifications and experience, income and claims history.


You may wonder why underwriters need so much information. When you are busy doing your day job it can be a tedious task to fill out a long form and hopefully we can help to explain why such information is necessary and how it can impact on your insurance cover.


At the bottom of the proposal or renewal form there is normally a declaration which requires your signature. By signing this you are usually confirming that you have made a fair presentation of the risk by disclosing all material circumstances or that you have given sufficient information to put a prudent insurer on notice that it needs to make further enquiries in order to reveal material circumstances. A matter is material if it would influence the judgement of a prudent insurer as to whether to accept the risk, or the terms of the insurance. The details requested on the proposal


are therefore important in providing insurers with the details necessary for them to assess the risk, or the terms of the insurance (including premium).


So what are you expected to know and provide


The Insurance Act 2015 (Act) abolished the basis clause which operated to turn insured’s pre-contractual representations into warranties and replaced with the requirement of fair presentation.


“The duty of fair presentation”


1. Before an insurance contract is entered into, the Insured must make a fair presentation of the risk to the Insurer, in accordance with Section 3 of the Insurance Act 2015. In summary, the Insured must:


a) Disclose to the Insurer every material circumstance which the Insured knows or ought to know. Failing that, the Insured must give the Insurer sufficient information to put a prudent insurer on notice that it needs to make further enquiries in order to reveal material circumstances. A matter is material if it would influence the judgement of a prudent insurer as to whether to accept the risk, or the terms of the insurance (including premium); and


72 | The Report • September 2018 • Issue 85


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