At a glance
- The Insurance Act 2015 (the Act) comes into force on 12 August 2016 and will apply to all Commercial non-life insurance policies
- A key aim is to ensure better exchange of information between insurers, brokers and customers
- In light of the Act we have also undertaken a detailed review of our ZTrade question sets and processes
ZTrade – Fair Presentation of Risk (FPOR) Commitment
In light of the Insurance Act 2015, we have undertaken a detailed review of our ZTrade question sets and processes to understand the main areas of risk and the key features that determine whether we write a risk and, if so, on what terms.
We are confident that our question sets and processes are comprehensive and capture the material facts and circumstances that we wish to know. We are also confident in the integrity and expertise of the brokers who complete the question sets on behalf of the insured.
We are therefore proud to announce our ZTrade FPOR Commitment for ZTrade business. We will accept the presentation as a fair presentation of the risk where the broker, having consulted with the insured as required by the Insurance Act 2015, has provided correct and complete answers to our ZTrade questions. Our ZTrade FPOR Commitment will apply across the entire ZTrade product range.
What does our ZTrade FPOR Commitment mean for brokers?
By giving our ZTrade FPOR Commitment, we are waiving our remedies for non-disclosure beyond the questions we ask on our question sets. We simply require correct and complete answers to our questions, making it easier for the insured to meet their disclosure obligations.
Of course, in order to provide correct and complete answers to our questions, we require that brokers have regard to the insured’s disclosure obligations under the Insurance Act. This includes consulting with the insured’s senior management and advising the insured to carry out a reasonable search for relevant information.
Giving your customers total confidence
Zurich is taking a different approach to The Insurance Act 2015 which we believe will benefit our customers.
Where a non‐deliberate or non‐reckless non‐disclosure would have resulted in us charging an additional premium if the risk had been fairly presented, we will settle the claim(s) in full and charge your customers that additional premium. This will give your customers total confidence that we will pay their claim(s).
View Zurich’s approach to the Insurance Act 2015: A guide for customers and brokers
Charging additional premium is not a right that is provided for by the Act. We believe that our additional premium approach should, in most situations, be more favourable to your customers when compared to the proportionate reduction of claim approach under the Act.
For example, if the proportionate reduction in claim remedy was applied to a £5m claim where the premium underpayment was £10,000 (representing 50% of the insured premium), the insured’s claim would be reduced by 50% (i.e. £2.5m). Previous and subsequent claims will also be reduced in the same manner, leaving the insured with reduced cover.
Under our additional premium remedy, we would pay the claim in full and recover underpayments to premium. Accordingly, we would charge the insured an additional £10,000 in premium and pay the £5m claim (and any subsequent claims) in full.
- Proportionate reduction in claim: (10,000/20,000) * £5m = £2.5m paid on claim
- Zurich’s additional premium approach: £5m claim paid with an additional premium charge of £10,000
Our additional premium approach does not prejudice our rights to apply the other remedies provided under the Act for failure by the insured to make a fair presentation of the risk.