Over two thirds of brokers feel that insurers have not provided enough guidance around the upcoming Insurance Act, according to the Q1 Broker Pulse - a quarterly poll of brokers from insurance and risk law specialist, BLM.
This was the key headline from the inaugural Broker Pulse, which questions a wide-range of UK brokers on issues affecting the broker community every quarter.
70% of respondents felt that underwriters had not provided them with enough information around the Act to enable them to assist customers with guidance on the duty of fair presentation and the issues around the knowledge of the insured, including the brokers as their agents.
The duty of fair presentation includes the disclosure of every material circumstance known but brokers are still unclear about what will be deemed sufficient information under the new legislation – over and above what they currently provide – to put an insurer on notice. The Insurance Act 2015 is due to come into force in August 2016.
Helen Devery, partner and head of the broker sector at BLM said: “The Insurance Act seeks to clarify commercial insurance law, but brokers are telling us that there is a need for greater clarity for them and their customers. At BLM we feel this could come in the form of an industry standard or specialist market guide. With less than a year until it takes effect there needs to be closer collaboration between underwriters and brokers to ensure they are able to deliver services and solutions for their clients that are fit for purpose and meet the requirements of the legislation.”
The Q1 Broker Pulse also found that 73% of brokers believe that the new Sentencing Council guidelines coming into force in February 2016 – which will see unprecedented fines for breaches of health and safety law based on revenue – will influence policies and underwriting. The financial risk to businesses and the increased risk of loss of liberty to directors and managers under these new guidelines could lead to more cases being contested to trial, and therefore a possible increase in costs for insurers. This could lead to a review of policy wording and additional premiums to underwrite this risk.
Another key finding was just 48% of brokers believing there is genuine appetite amongst their customers for cyber insurance and risk strategies. This is despite 89% of brokers ranking it as one of the top risks their customers are facing, and recent high-profile data breaches that have devastated a range of companies.
Devery continued: “Cyber security is probably the most talked about emerging risk in the insurance sector but this hasn’t translated into massive customer demand. Cost may be a factor in this, particularly with the SME market, but the risks are increasing daily so the industry must meet this challenge head on with new products and risk solutions.”
Other findings include:
55% are unaware of Vnuk, a European case that will affect many organisations' insurance arrangements, because some of the incidents currently covered under employers' liability and public liability insurance policies will have to switch over and be picked up by a motor policy
The risks of most concern to brokers’ customers are:
- Cyber risks: 89%
- Business interruption / loss of supply chain: 58%
- Reputational and brand damage: 64%
- Regulatory influences: 45%
- Retention of staff: 25%
- Political instability: 17%