The Insurance Act 2015: The Definitive Business Guide to UK Insurance Law

1. The Duty of Fair Presentation of Risk

The duty of fair presentation is the foundation of modern UK commercial insurance disclosure. The policyholder must make a fair presentation of the risk before the policy is entered into, renewed, or varied.

In practical terms, this means the business must disclose every material circumstance it knows or ought to know. If it does not disclose every material circumstance directly, it must at least provide enough information to put a prudent insurer on notice that it should ask further questions.

A material circumstance is information that would influence a prudent insurer when deciding whether to accept the risk, what premium to charge, what limit to provide, what excess to apply, or what exclusions and conditions to impose.

The phrase “ought to know” is important. A company is not judged only by what the person completing the form personally remembers. It may need to conduct a reasonable internal search, drawing information from senior management, finance, legal, compliance, HR, IT, operations, project teams, and those responsible for arranging insurance.

A fair presentation must also be clear and accessible. A business should not bury important facts in disorganised documents or expect the underwriter to identify critical information hidden inside a large data dump.

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2. Proportionate Remedies for Non-Disclosure

The Insurance Act 2015 also changed the remedy framework where a business fails to make a fair presentation of risk. Under the modern regime, an insurer must show that the breach of the duty of fair presentation was material to its underwriting decision. In other words, the insurer must show that, had it known the true facts, it would either not have entered into the policy at all or would only have done so on different terms.

The remedy then depends on the nature of the breach. If the breach was deliberate or reckless, the insurer may be entitled to avoid the policy, refuse all claims, and retain the premium. If the breach was not deliberate or reckless, the remedy is more proportionate. The outcome depends on what the insurer would have done had a fair presentation been made.

A non-deliberate mistake can still have serious financial consequences. However, the Act introduced a more calibrated approach, aligning the remedy with the underwriting impact of the missing or inaccurate information.

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3. The Abolition of “Basis of Contract” Clauses

The Insurance Act 2015 abolished “basis of contract” clauses in non-consumer insurance. This was a major improvement for commercial policyholders. Historically, insurers could include wording that converted answers in a proposal form into warranties. This meant that even an inaccurate answer to a relatively minor question could potentially have severe consequences, because the accuracy of every statement became a fundamental condition of the policy.

A material misrepresentation or failure to disclose material information can still trigger remedies under the Act. However, insurers can no longer rely on a broad “basis of contract” clause to make the entire policy dependent on every answer being perfectly accurate as a warranty.

This reduces the risk of disproportionate claim disputes arising from technical or immaterial inaccuracies.

Businesses must still answer questions carefully, correct errors, disclose material circumstances, and review Statements of Fact before accepting cover.

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Warranties and Terms: How the Law Protects Your Claim

The Insurance Act 2015 also changed the treatment of warranties and certain policy terms.This is important because commercial policies often contain obligations that apply before or during the policy period. These may relate to alarms, fire protections, stock storage, payment procedures, cyber controls, premises security, inspections, health and safety measures, or other risk controls. 

Before the Act, breach of warranty could create very harsh outcomes. The 2015 Act introduced a more balanced approach.

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The Suspension of Warranties, Not Cancellation

Under the old law, breach of an insurance warranty could discharge the insurer’s liability from the moment of breach. This could permanently damage cover, even if the breach was later remedied. The Insurance Act 2015 changed that position. A breach of warranty now suspends the insurer’s liability for losses occurring during the period of breach. If the breach can be remedied and is remedied before a loss occurs, cover can be restored.

For example, suppose a commercial property policy contains a warranty requiring a burglar alarm to be activated outside business hours. If the business forgets to set the alarm overnight, liability may be suspended while the breach continues. If the alarm is turned back on the next morning and the risk returns to the position contemplated by the policy, the breach may be remedied.

If a theft occurs while the alarm warranty is being breached, the insurer may have a defence. If a covered loss occurs after the breach has been remedied, the insurer cannot simply argue that cover was permanently cancelled from the earlier breach.

This is a significant protection for policyholders, but it should not be misunderstood. A warranty breach can still be serious. Businesses should have procedures to comply with policy warranties and should remedy any breach as soon as it is identified.

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Terms Irrelevant to the Loss

The Act also limits the ability of insurers to rely on certain policy terms where the breach is irrelevant to the loss that actually occurred. If a policy term is designed to reduce the risk of a particular type of loss, at a particular location, or at a particular time, the insurer may be restricted from relying on breach of that term where the policyholder can show that the breach could not have increased the risk of the loss that actually happened.

For example, if a factory suffers a severe flood, an insurer should not normally be able to reject the flood claim solely because the business failed to inspect fire extinguishers, where that failure could not have increased the risk of flood damage.

The policyholder must show that the non-compliance could not have increased the risk of the loss that actually occurred in the circumstances in which it occurred. 

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Practical Examples for Commercial Policyholders

Example 1: Undisclosed Contractual Liability

A technology consultant renews its Professional Indemnity Insurance but does not disclose that it has signed a new contract with US jurisdictional exposure. If a claim later arises under that contract, the insurer may argue that the liability profile was materially different from the risk presented at renewal.

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Example 2: Cyber Controls Overstated

A Cyber Statement of Fact says that multi-factor authentication is deployed across all remote access and privileged accounts. In reality, MFA only applies to email. If a cyber claim later arises from compromised administrator credentials, the insurer may review whether the minimum cyber control declaration was accurate and material.

This is why pre-populated Statements of Fact must be reviewed carefully before cover is bound.

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Full details of the Act:

Insurance Act 2015: The full text of the Act as published by the UK Government

Explanatory Notes on the Insurance Act 2015: Provided by the UK Government to accompany the Act, offering insights into its provisions and intended effects.