John Hurrells calls for "culture change"

Airmic chief executive John Hurrell is plotting to change the culture of UK insurance law which currently allows insurers to reject claims for non-disclosure.

Speaking at the 2010 Airmic conference at the Manchester Central today, Hurrell described the proposals as “a new way of doing business, suited to the 21st rather than the 19th century.”

It comes as Airmic revealed that non-disclosure accounted for a third of all claims that members have had declined in the past two years, according to a recent member survey.

Airmic is attempting to change the Marine Insurance Act of 1906 which imposes an obligation on the buyer to anticipate what a “prudent insurer” would deem “material2 underwriting information. An insurer that can show there has been a breach in that duty, even if inadvertent and unrelated to the claim, can avoid the claim or even the policy itself.

Hurrell claimed that as the concern about insurer security reduces, the spotlight is now focused on whether claims made in good faith will get paid, and said there was little value in having an insurer if a claim is avoided on a technicality.

“We’re not talking here about people who have deliberately withheld relevant information. The legal framework is more than a century old and places an impossible burden on the buyer,” he said. “The system would be totally unworkable were it not for the flexible and fair-minded attitude that insurers adopt most of the time.”

Airmic is now planning to send a guide to members in the autumn with three main objectives: to eliminate innocent non-disclosure as a reason for avoiding a claim; to define where knowledge rests within an organisation; and to ensure proportionality of penalty where there has been non-disclosure.

It has also held talks with its insurer partners about the insertion of side agreements and clauses into contracts. Hurrell said the feedback has been “overwhelmingly understanding and supportive, but inevitably this is going to take time.”

“We’re seeking a new approach from buyers, underwriters and brokers alike,” said Hurrell. “Above all, we need a culture change where the underwriting takes place when the insurance policy is purchased. If the underwriter has any awkward questions he or she should ask them at this stage, not when a claim is made. For their part the buyers need to start their data and information gathering earlier in the process than has historically been the case, whilst brokers owe it to their clients to help them avoid the pitfalls of non-disclosure.”