Responsibility and timing: how the new Insurance Act affects land agents

Professional intermediaries, such as land agents, who supply information on behalf of a client, need to be aware of their responsibilities under the new Insurance Act. The new Act, which came into effect on 12^th August 2016, means that the duty of disclosure has become far more onerous and carries more responsibility. Providing only a copy of last year’s insurance schedule is no longer acceptable. Instead it has become an agent’s duty to provide what is considered to be a fair representation of the risk to be insured.

Land agents will be expected to have the same knowledge of all properties and business arrangements as their client when arranging insurance cover. This includes accurate knowledge in respect of alarms, safes, security, jewellery, lifestyle and claims history, for example. Our advice to all professionals acting on behalf of their principals is to consider carefully who is responsible for producing the required information and to ensure that any relevant new information has been included.

It will all be recorded in a Statement of Fact, which is the basis of the agreement between the insured and the insurer. All, and any, information relevant to the risk must be passed on. Any information deemed important must be highlighted and not hidden away in large amounts of less important data (known as data dumping). If the insurer ultimately deems that a full and honest declaration has not been made, then a claim will be put in jeopardy.

Where a client has failed to disclose information at the outset of the policy, insurers will be able to avoid a claim if this lack of material information would have prevented them from writing the risk in the first place or the omission was regarded as deliberate or reckless. Insurers may still reduce the amount of a claim if non-disclosure is deemed accidental.

In some circumstances, failure to disclose relevant information to an insurer may result in a decision to decline the claim altogether. In such cases a client might have to look to the agent or professional who supplied the information in order to recover any uninsured loss.

It is inevitably going to take the industry a while to find the best way to deal with these changes. In the short term, the process may take a little longer so land agents should take this into account. Insurance brokers may need additional time to turn around quotes if further information has to be requested and supplied. There is now also a greater emphasis on the insurers to read submissions thoroughly before agreeing to accept a risk.