PROTECTING YOUR STAFF AND EQUIPMENT
The toolbox gives our clients access to all the information they need to handle any claims as well as manage risk and find out who we work with. This handy section has access to all the forms you will need if a problem happens and is full of tools to help your business get up and running quickly. Use the links below to find out more.
All policies contain conditions regarding the notification of claims and require that claims should be notified within a specific time. It is, therefore, important you notify us immediately of any event or circumstances which might give rise to a claim together with preliminary details.
Procedures vary depending on the type of claim involved. More specific information is available by clicking on the panel above to view the procedure for that type of claim, however the following provides a more general overview:
In the case of theft/Malicious Damage notify the police who will provide a crime reference number. Please compete an Accident Report Form (claim form) where appropriate. These are available to download below.
Make no admission of liability
Provide as soon as possible such written evidence of the claim as may be required.
If a Writ or Summons is received, this should be sent to us at once unanswered, as any delay could prejudice your Insurers' position and thus your right to receive indemnity under the policy.
For some claims Insurers have a Claims Helpline for reporting claims. These details are shown in your policy documents.
In the event of an incident that has resulted in loss, damage, destruction, injury, death or disease which is likely to result in a claim, please contact: 023 8062 2190.
Please also note the following guidance in connection with claims.
Notify us immediately of any incident involving death or injury to a person or damage to property. This applies to any allegation made of an incident occurring.
Take statements from witnesses immediately whilst fresh in their minds.
Under no circumstance should you admit any liability.
All correspondence should be forwarded to us unanswered.
Notify us immediately of any circumstances arising for which you believe cover may or does exist
Be clear on the specific circumstances and note this down and collate the appropriate documents
Do not instruct any other parties which will incur costs e.g. solicitors, accountants, specialist advice etc., as these services may be provided by your Insurers and will need to be approved by your Insurers for the costs to be met
Under no circumstance should you admit any liability. Do not enter into any communications without prior authority from your Insurers.
Forward all legal documents and correspondence to us immediately as a defence can be lodged with the appropriate authorities and within required timescales.
Professional Indemnity Insurance
Should you become aware of any circumstances which might give rise to a claim due to a professional negligence, error or omission, it is important to notify Noyce Insurance Solutions immediately and not wait for a claim to materialise. Do not enter into any communications with the party making the allegation without Insurers’ knowledge and approval. Contact details as below.
Directors' and Officers' Insurance
Should a claim be made or intimated against any Director or Officer of the company for a breach of duty, act of negligence, omission or other matter, it is important to notify Noyce Insurance Solutions immediately and not wait for a claim to materialise. Do not enter into any communications with the party making the allegation without Insurers’ knowledge and approval. Contact details below.
To ensure your claims are handled promptly please call 023 8062 2190.
Property Claim Procedures
PROTECTION OF YOUR PROPERTY
If damage is extensive we will arrange for Insurers to instruct a Loss Adjuster immediately. Begin compiling details of the damaged items and put together as much documentary evidence in support of the items claimed as possible, such as original receipts of purchase or replacement/rebuilding estimates. Take pictures of the damaged items before they are moved etc. Do not dispose of any damaged items.
THEFT OF YOUR PROPERTY
Compile details of the lost or damaged items and put together as much documentary evidence in support of the items claimed as possible, such as original receipts of purchase and/or replacement estimates. It is a policy condition that you notify the Police of any incident. Keep a note of the Crime Reference Number and the address of the police station.
LOSS OF MONEY
Documentary evidence of the exact amount of money stolen will be required. Report any incident to the Police and keep a note of the Policy Crime Reference Number.
If you suffer glass breakage telephone Noyce Insurance or the insurers 24 hour helpline. Emergency Repairs can normally be arranged immediately with an approved insurer contractor.
Whenever you feel that your business has suffered a reduction in turnover as a result of an incident of insured damage you should let us know immediately. Insurers will appoint Loss Adjusters to visit you and help quantify the loss.
As the claim progresses, Insurers may require the following information: your annual report and accounts (to demonstrate your turnover and profit), details of any additional expenditure and overtime payments to staff. It is important to set up a separate record of any costs incurred in connection with the incident.
Please click Property Damage Claim Form to download the document, then print, complete and return the form to Noyce Insurance Solutions by email, post or fax.
Employer's Liability Claims Procedure
Employer's Liability Claims / Injury to Employees
In April, 1999, important changes took place in the way personal injury claims are processed. Please note that these have not been introduced by insurers but by Lord Woolf (and are referred to as Woolf reforms); they are the Law. Failure to comply with them will lead to fines being imposed by the courts and these costs will be passed to you if you have not complied with the Woolf Protocol.
What you must do upon receipt of a Letter of Claim or EL1 Form.
A letter of claim must be acknowledged by Insurers, within 21 days of the date of the letter of claim. It is therefore imperative that any letter of claim received in your office is passed to Noyce Insurance Solutions immediately by fax, e-mail and post. If an EL1 Form is received this needs to be acknowledged by Insurers within 5 days of the form being issued hence the urgency or informing Noyce immediately.
Liability must be accepted or denied by underwriters within three months, inclusive of the 21 days given with regards to a Letter of Claim and 30 days of the date of issue of the EL1 Form.
How does that affect me?
Documents have to be declared — these vary depending upon the size and type of claim. Insurers will know what these documents are and you must provide copies of these when they are requested.
You are required by Law to sign a document entitled Disclosure Statement. This states that you have looked for all documents. If some cannot be found, reasons for their absence must be given. This document must be signed by a senior employee and it would be sensible to allocate this responsibility to one person. The following are examples of the documents likely to be needed:
Retain all evidence on any incidents:
- Incident/Near miss report forms
- Accident Book entry
- First Aider’s report
- Safety Officer report
- Health & Safety Executive documentation (RIDDOR)
- Photographs and / or sketch plans
- Security Videos
- Pass on all third party correspondence to us immediately and unanswered
Please click Employer's Liability Claim Form to download the document, then print, complete and return the form to Noyce Insurance Solutions.
Public Liability Claims Procedures
Public Liability Claims - Injury to Third Parties / damage to their Property
As with Employer's Liability claims, the Woolf reforms have had a noticeable impact on Public Liability claims. It is essential that any Letter of Claim or PL2 Form received is passed immediately to Noyce Insurance Solutions. Insurers only have 21 days in the case of a Letter of Claim and 5 days from the date of issue of the PL2 Form to respond on the Policyholder's behalf with an admission or declinature of liability.
It is not always easy to recall incidents 2 or 3 years down the line - it is therefore good practice and sometimes a condition of the policy to keep accurate reports and records of all incidents likely to give rise to a claim.
Do not admit liability to anyone.
Please click Legal Liability Claim Form (Microsoft Word format) to download the document, then print, complete and return the form to Noyce Insurance Solutions. For more information please call us on 023 8062 2190.
Motor Claim Procedures
MOTOR – THEFT FROM VEHICLE
For theft of audio equipment, contact Noyce Insurance and we will provide details of an approved audio supplier who will make arrangements for replacement. A Crime Reference Number from the Police will be required.
MOTOR – THEFT OF VEHICLE
If a vehicle is stolen, the Police must be notified immediately and, again, a Crime Reference Number should be obtained. A theft claim form should be completed and returned to Noyce Insurance.
There is usually a waiting period of around 6 weeks before a stolen vehicle is declared a total loss, and a settlement offer based upon the pre-theft market value of the vehicle will then be made. We suggest that if the vehicle is not recovered within 14 days the following documents should be forwarded to Noyce Insurance in order to assist a valuation:
a) Vehicle Registration Document (V5) confirming proof of ownership of the vehicle
b) MOT test certificate, if applicable
c) Hire Purchase/Leasing Documents, if applicable
d) Servicing Records and Receipts for any accessories which may enhance the vehicle value
e) Vehicle Keys
If the vehicle is recovered in a damaged condition, please contact Noyce Insurance Solutions.
MOTOR - WINDSCREEN/GLASS
In the event of such damage, you should refer to your policy documentation which will provide you with details of the glass replacement company used by your insurer. They will arrange replacement of the glass at a time and place to suit you, and will send the invoice direct to your Insurers for settlement. You pay for any excess applicable and the VAT element which you may be able to recover from Customs & Excise.
Under the terms of your policy you must report any accident to your Insurers for their information, even if you do not intend to claim. This is to protect you in the event of an unexpected claim being presented by a third party at a later date.
If you receive any correspondence from a third party in connection with an accident then it should be forwarded to us immediately, unanswered. You must not enter into negotiation with third parties or make any offer or promise of payment.
If your driver receives any correspondence from the Police or a Court Summons then, again, this should be forwarded to us immediately. Your Insurers may wish to defend the Summons on your behalf if they feel it will have an important bearing on the outcome of any claim being made against you.
MOTOR – OWN DAMAGE
You are strongly advised to use the insurers approved repairer scheme in order to minimise down time and inconvenience. Details of participating motor garages are available from Noyce Insurance. If this is not possible please obtain estimates from at least two different repairers for your insurer's consideration and we will arrange an urgent inspection.
Please click Motor Vehicle Accident Claim Form to download the document, then print, complete and return the form to Noyce Insurance Solutions.
Ministry of Justice Reforms 2013
Recent changes to the Civil Justice system in the UK mean that Insurers’ approach to defending claims is under scrutiny and there are more opportunities for a straightforward claim to “fall between two stools”. These changes are the most significant in over a decade.
Some of these changes have been brought about by the introduction in the late 90s of Conditional Fee Agreement (CFA) more commonly known as “no win no fee” arrangements. The nature of these fee arrangements caused a massive rise in insurance claims costs; Legal fees accounted for more than 80% of the total claims costs, as solicitors were allowed to include a success fee, payable by the losing party.
A summary of the changes is as follows:
Defendants will now have to meet their own costs, win or lose
Success fees along with CFAs are now banned
After the event insurance will no longer be recoverable
Referral fees from FCA regulated firms, such as insurers, (as well as solicitors and claims management companies) are now banned
General damage awards (injury element) have increased by 10%
In 2010 the Government introduced a claims ‘portal’ for all Road Traffic claims to be reported through with a view to speeding up processing of smaller personal injury plans by imposing strict timescales and fixed legal fees.
From 1st April 2013 the portal was extended to include Employers Liability and Public Liability personal injury claims. The new increased limit for claims submitted through the portal has been increased to £25,000.
So how does this affect you?
Principally, in terms of timescales, which are now stricter than before. An incident now pretty much requires immediate action to prevent a claim falling foul of the process, and unnecessary increased costs being incurred.
Insurers only have 15 days to respond to a Road Traffic Act claim, 30 days for Employers liability claims and 40 days for Public liability claims, to make a decision on liability.
If you need to know more about the Ministry of Justice Civil Law reforms and how they affect you, please call us on 023 8062 2190.
All UK policy wordings contain a clause that specifically excludes the costs of preparing and negotiating claims. Whilst this may seem a relatively minor exclusion, in a major loss, the cost to you of managing your claim, having valuations prepared and calculating the business interruption loss could be significant. You could pay for this after the event, but costs may be over £150 per hour. Our Loss Recovery Insurance covers all claim preparation, negotiation and settlement costs for a small annual fee.
Your Claims Service
We offer via Lorega Claims and Underwriting Services Ltd, an unrivalled claims service to our clients and in the event of loss or damage to your business, simply contact us. When required, we will arrange for Lorega's immediate involvement. Then leave the rest to them. They will appoint a local claims specialist who will visit you to advise on the best approach to your problems.
Your specialist will then prepare your claim(s) and negotiate for the best possible settlement to which you are entitled. The cover arranged will provide you with assistance in most likely losses, however should you be in doubt, please ask us for policy details.
Loss Recovery Your Commercial Claims Service:
Making your Insurances work for you
Telephone advice and assistance for all claims
Personal visits on all qualifying losses
Cover for both material damage and business interruption claims
Arranging interim payments from insurers when necessary
Arranging temporary premises and equipment to enable trade to continue
Preparation of a fully valued inventory for all items damaged or stolen
We attend all meetings and handle all correspondence with Insurers
Co-ordination of builders, surveyors, decorators etc as required
We work in conjunction with your own accountants to formulate a loss of profits claim
Negotiation of the best possible settlement(s) to which you are entitled
To make sure that your business gets the right cover at the right price please call the Noyce Team on 023 8062 2190 to protect against Losses.
Risk management and commercial insurance go hand in hand so it is important that the correct solutions are provided. We help protect clients through cost-effective insurance coverage, risk transfer solutions and proven loss prevention techniques.
Organisations are obliged to manage health and safety to a satisfactory level of compliance, controlling risks and preventing harm to people. The introduction of Corporate Accountability legislation makes the business, and in particular the directors, fully accountable in these matters.
Insurers generally are increasingly intrusive and critical of safety systems and it is becoming a significant factor at the underwriting of any risk. Underwriters are demanding more information and qualified answers about your plans for health and safety management.
As health and safety and quality risk management are key drivers to insurance costs and underwriting of insurance cover it makes logical, not to mention financial sense, to bring the two functions together. At Noyce Insurance we are able to do this for the benefit of our clients. We will provide a “hands on” solution that addresses the issues of compliance with health and safety legislation and gives both value and benefit to our customers in the placing and rating of insurance products.
For more information please call the Noyce team on 023 8062 2190.
DOCUMENTS & LINKS
At Noyce we like to make sure that every client has access to all of our documents so that if something happens they can make a claim instantly. So below please find all the information you need.
Terms Of Business
Solicitors Professional Indemnity
Each year the process for securing terms seems to change with a preference for insurers to use their own forms. With this in mind please contact our team in the office to ensure the right document is provided to meet your needs.
Over the years we have accrued a large number of useful links to help you find out the most up to date information. Enjoy.
The ABI (Association of British Insurers) represents the collective interests of the UK’s insurance industry. The Association speaks out on issues of common interest; helps to inform and participates in debates on public policy issues; and also acts as an advocate for high standards of customer service in the insurance industry.
The Fire Protection Association is the UK’s national fire safety organisation, one of 28 similar national bodies worldwide. It was established in 1946 and has strong support from the insurance industry, primarily through the Association of British Insurers and Lloyd’s.
The Financial Conducts Authority (FCA) is an independent non-governmental body, given statutory powers by the Financial Services and Markets Act 2000.
Britain's Health and Safety Commission (HSC) and the Health and Safety Executive (HSE) are responsible for the regulation of almost all the risks to health and safety arising from work activity in Britain.
The Master Locksmiths Association is a non-profit making body, established to set and promote standards of conduct, practice and materials within locksmithing.
The National Security Inspectorate (NSI) is an independent, not-for-profit approvals body providing inspection services for the security and fire industries.
The information shown below provides an additional guide to help you understand some of the important aspects of insurance. It is by far from exhaustive and is not a substitute for the policy documents themselves; however it is important that there is a clear understanding of the implications of failing to follow some of the insurance policy terms and conditions. If you would like to talk to a member of the Noyce team to find out more information then please call us on 023 8062 2190.
Material Facts & Duty of Disclosure
If you are a business and your insurance policy is governed by English law, you must, at all times, act with utmost good faith towards your insurer. This means that before your policy is placed, at renewal, when varying or extending the policy (and also during the policy period if your policy contains a particular clause stating that any change in the circumstances must be advised to your insurer), you must disclose to your insurer all information, facts, and circumstances which are, or ought to be, known to you and which are material to the risk. When providing information or completing a proposal form or otherwise confirming any information to your insurer, you should take care to ensure that the details provided are complete and accurate.
Even where a proposal form is used, you should note that your duty of disclosure is not confined to answering the specific questions listed in the form and/or asked by us or your insurer and that all material circumstances should be disclosed to your insurer, regardless of whether or not your insurer has asked for the information.
If your policy started, was renewed, or was altered on or after 12th August 2016...
... then the new Insurance Act 2015 will apply. This means you will have a duty to make a ''fair presentation" of the risk and you must disclose to your insurer every material circumstance which you know, or ought to know*. The Insurance Act gives some guidance as to what this means:
You must disclose every material circumstance which is known by (i) your senior management (the Act defines "senior management" as "those individuals who play significant roles in the making of decisions about how the insured's activities are to be managed or organised"); and (ii) those individuals responsible for arranging your insurance (which includes risk managers and any employee who assists in the collection of data, or who negotiates the terms of the insurance, such as your individual brokers).
What should you know?
You "ought to know" what should have been revealed by a "reasonable search" of information available to you. This means you must conduct a reasonable search for material information that is available to you, and disclose this information to your insurer.
It is important to note that this Includes not only information held within your organisation but also outside it, including information held by your agents, and also held by persons and entities who are to be covered by the insurance.
You must not make any misrepresentations to your insurer.
You must provide the information to your insurer in a manner which would be "reasonably clear and accessible" to a prudent insurer. This is a new, standalone, duty.
What is "Material"?
Under English law, every circumstance is material if it would influence the judgement of a prudent insurer in fixing the premium and/or the terms of the insurance and/or determining whether to accept the risk. This refers to "any" insurer, not just the insurer who has been offered the risk.
A circumstance may be material even if disclosure would not necessarily lead to an increased premium or declinature of the risk.
In the context of business insurance policies, insurers are likely to regard matters such as, but not limited to, the examples detailed in Appendix 1 of this document as material. If you are unsure whether a fact or circumstance should be disclosed, or whether the duty to disclose information continues throughout the period of a particular policy, we recommend that you disclose the information anyway, as failure to do so may lead to your insurer reducing its claim payment, applying additional terms or even avoiding the policy.
When to disclose
Your duty of disclosure applies throughout the negotiations preceding the placing of your policy until your insurer has agreed to accept the risk and has set the terms, price, and level of participation, and the contract has been finalised.
After the policy has been placed, your duty of disclosure arises again:
if you wish to make changes to the policy so that your insurer takes additional risk
when there is an extension of the policy period
when a policy condition requires you to advise your insurer of a specific increase or alteration in risk
Your duty to disclose material facts and circumstances also arises again during the renewal process.
Failure to disclose
The consequences of failing to disclose a material fact or circumstance will depend on the precise terms of your insurance policy and on whether the policy was placed (or varied) before 12th August 2016.
(i) If your policy was placed, renewed or altered before 12th August 2016:
If you fail to disclose, or misrepresent, a material fact or circumstance which you know or ought to know, your insurer may void the contract (or the variation), that is, it may treat the contract as if it had never existed. Your insurer may be entitled to recover any claims paid out to you prior to the avoidance, and in some circumstances may be entitled to keep the premium.
(ii) If your policy started or was renewed (or altered) on or after 12th August 2016
For these policies the Insurance Act 2015 will apply and your insurer's remedy for non-disclosure will depend on whether or not your failure to disclose, or misrepresentation, was deliberate or reckless:
If you deliberately or recklessly fail to comply with your duties, your insurer will be able to avoid the policy, that is, to treat it as if it had never existed, and may retain the premium.
If your failure to comply with your duties was not deliberate or reckless, your insurer's remedy will depend on what the insurer can show it would have done had you made a "fair presentation of the risk"
If your Insurer would not have entered into the contract on any terms, it can still avoid the contract but must return the premium.
If your Insurer would have entered into the contract but on different terms (not relating to premium), the contract may be treated as if it included those terms from the outset.
If your insurer would have entered into the contract but would have charged a higher premium, the amount paid on a claim may be reduced proportionately.
Please note that the Insurance Act 2015 will also apply to alterations made to policies on or after 12th August 2016, even if the policy commenced before this date.
* In the event of a breach of the duty of fair presentation in relation to a variation made on or after 12th August 2016, the Insurer will have a similar range of proportionate remedies available, depending on whether the breach was deliberate or reckless and what the insurer can show it would have done had the duty not been breached. This may result in the insurer treating the policy as if the variation was never made, reducing your claim payment, applying additional terms, or even avoiding the entire policy.
Non-exhaustive illustrative examples of material information
Circumstances which may be considered material are:
Special or unusual facts relating to the risk.
Any particular concerns which led you to seek insurance cover for the risk.
Anything which would generally be understood as being something that should be disclosed for the type of risk in question.
By way of example:
General information about your business
Business activity (or change to business activity), including processes, products, and geographic presence.
New companies, markets, acquisitions or disposals.
Additional premises/ insurable items.
Changes to premises.
Higher than ordinary degree of risk or liability (specific to your business or industry-specific).
Business financial status.
Loss history/experience, including paid and outstanding claims and potential claims/ circumstances/ incidents/losses that were not reported as claims (whether insured
Details of criminal charges and convictions of your organisation, its directors or employees; regulatory investigations or enforcement! Health and Safety investigations and prosecutions.
Any insurers' previous declinatures, refusals to renew, imposed terms/ restrictions in cover, mid-term cancellations, etc.
Material damage policies
Changes in construction and/or purpose.
Changes to fire protections.
Increased storage of hazardous materials/ attractive stock.
Any attempted break-in or arson attack.
Use of temporary/ third party premises.
Changes to business activities (including disclosing historic activities that have ceased).
The creation or acquisition of new companies for which cover is required.
Products exported to, or work in, overseas territories (particularly the USA or Canada).
Work in or on hazardous locations such as offshore installations.
Health and safety investigations/prosecutions.
Motor fleet policies
Corporate investigations/ prosecutions.
Changes to vehicle performance.
Change of use of vehicle.
Business personal accident and travel policies
Changes to business activities.
Material differences in the Travel pattern (different geographies, number of journeys, etc.).
REMEMBER – this list provides examples only. If in doubt – disclose.
Adequacy of Sums Insured and Limits of Indemnity
Many policies, for example Material Damage and Business Interruption, include an ‘Average’ clause. This means that if you make a claim and your sums insured are found to be inadequate your claim settlement will be proportionately reduced.
Average - Where Average is said to apply and there has been under-insurance, the Insured's claim is reduced in direct proportion to the under-insurance.
There are different types of Average under different insurance policies. In some cases Average will not apply unless the sum insured is less than 85% of the actual Reinstatement Value.
Please ask us if you would like further information on how and where Average might apply to your insurances.
Average is applied differently to the two bases of cover.
Reinstatement - Average will apply if the sum insured at the time of reinstatement is inadequate but, generally, only if the sum insured is less than 85% of the cost of reinstatement.
Indemnity - Average will apply if the sum insured is inadequate at the time of the loss
The example shown below demonstrates the effect on a claim:
It is essential therefore that your sums insured and limits of indemnity are sufficient for the risks insured and are reviewed at regular intervals.
In the event that the insurance cover is subject to the policy condition of average, the sums insured must represent the full value of the risk insured in accordance with the basis of settlement detailed in the policy. If the sums insured fall short of the full value average may apply and claims settlements may only provide partial payment.
Whilst we are pleased to provide guidance on the basis of cover, we do not accept responsibility for the adequacy of the sums insured or indemnity limits. Where appropriate, we recommend that you consider professional valuation services.
Business Interruption – calculating the gross profit sum insured
Business Interruption cover is arranged to protect your loss of earnings and additional expenses incurred following a Material Damage loss. To ensure that you receive the full benefit of the insurance cover in the event of a claim it is critical to ensure that the sum insured and the indemnity period are correct.
The 'Gross Profit' sum insured is calculated for insurance purposes as follows:
'The amount by which the sum of the annual turnover plus closing stock and work in progress exceeds the sum of the opening stock, work in progress, purchases, bad debts, carriage, packing and freight'.
Once you have calculated this figure you need to adjust this to allow for the indemnity period selected and also for anticipated growth of the business during the period of insurance itself. You should bear in mind that the 'worst case scenario' loss may not occur until the last day of the period of insurance.
If there are other costs that you feel will vary in the event of an interruption these can also be noted in the 'Gross Profit' definition. As with the Material Damage section, the Business Interruption sum insured will be subject to the condition of Average so that under-insurance will be penalised in the event of a claim.
The 'maximum indemnity period' is the longest period of time that insurers will cover the Business Interruption loss from the date of the Material Damage claim.
The indemnity period selected should represent the maximum time that can reasonably be anticipated for your business to be financially affected by an insured loss. Factors that can impact the length of the indemnity period include but may not be limited to:
Demolition of existing buildings and site clearance
Redesign, planning permission and tendering for new premises
Replacement of equipment and specialist machinery
Replacement of stock
Restoration of supplier and customer base
It is important for a 'worst case scenario' to be envisaged when deciding upon an adequate indemnity period to ensure that the policy will provide cover until the business reaches the operational level that it would have achieved had it not been for the loss.
Whilst we are able to provide guidance on how to assess the sum insured and indemnity period, we cannot advise you on what may be a suitable period for your business as this can vary widely from one business to another and even between businesses in the same sector. Therefore, we do not accept any responsibility for the adequacy of your indemnity period or sum insured. You may wish to consider obtaining suitable professional advice in this respect.
Adequacy of Limits of Liability
The limit of liability is the maximum amount of money that an insurer has agreed to pay up to, on behalf of a policyholder in any one year, for claims made against them.
Click the links below to find out more
Ogden Discount Rate
What is the Discount Rate?
The Ogden Discount Rate is set by the Lord Chancellor and is used to calculate how much insurance companies should pay out to customers in cases of life-changing injury. The rate was previously set at +2.5%, however, as of 20th March 2017 the rate has reduced to -0.75%. This is one of the most significant changes faced by the insurance industry in some time and will undoubtedly have a substantial impact on future injury claim settlement figures.
The objective is to make sure a severely injured person has the necessary financial security to provide for their care and loss of earnings. The discount rate is used to calculate the amount of compensation they receive to reflect the interest they can expect to earn when that money is invested.
Impact of the change The reduction means that those suffering from serious injuries will receive significantly higher compensation payments than before. This will affect claims’ costs for all lines of business which see claims for bodily injury – including Private and Commercial Motor, Motor Trade and Casualty (Employers Liability, Other Liability and Contractors Liability). As such, insurers have no choice but to immediately consider their pricing requirements in this new environment. This will be an unwelcome change for insurers, brokers and customers alike but one that cannot be ignored.
The Ogden Tables list multipliers which apply at the various discount rates across a range of -2% to +3% by age and gender of Claimant for both working life based on likely retirement age and for lifetime losses.
John is 30 years old and was seriously injured in a car accident. At the time of his accident he was earning £25,000 net per annum. His injuries are so severe that he’ll be unable to return to work and he will need nursing care for the rest of his life. The cost of the nursing needed is currently £75,000 per year.
John’s claim with 2.5% Discount Rate
The multiplier for loss of earnings is 22.84* and the lifetime multiplier is 29.60* This means the future loss of earnings claim is calculated as £25,000 x 22.84 = £571,000* The nursing care element of John’s claim is calculated as £75,000 x 29.60 = £2,220,000* Total damages for these elements of the claim therefore amount to £2,791,000*
John’s claim with -0.75% Discount Rate
The multiplier for loss of earnings is 38.71* and the lifetimes multiplier is 71.43* Future loss of earnings claim is calculated at £25,000 x 38.71 = £967,750* Nursing care element of John’s claim is calculated as £75,000 x 71.43 = £5,357,250* Total damages for these elements of the claim therefore amount to £6,325,000*
This gives an increase in the amount the insurer will need to pay of £3,534,000 or 127%.
* Calculations simplified to reflect raw data in the tables, i.e. excludes further adjustments.
Consequences of the change The change in the Ogden discount rate from its current +2.5% to -0.75% reflects a significant increase in the total settlement of a claim. This may make your existing policy limits of indemnity inadequate in the case of a serious claim. This will have a material impact on insurers’ balance sheets and unfortunately means they need to reconsider the future premiums charges for Private and Commercial Motor customers as well as those purchasing Liability including Employer’s and Public liability, Motor Trade, and SME insurance products.
Noyce recommend that you revisit your Employer’s liability and Public liability insurance limits of indemnity in the light of this change. This could help protect you from having to pay out large sums in the result of a claim where the limit is breached. The change in the discount rate can potentially leave you exposed to uninsured loses, impacting your company’s cash flow and revenue. If you don’t review your limits of indemnity you risk being hit with a shock pay out should a claim be settled at a rate higher than the existing limit.
We are dedicated to ensuring our customers have the right cover at the right price, and we will work alongside you to amend your policies where necessary following the discount rate change.
Warranties and conditions precedent to liability- Nasty Insurance Terms (NITS)
According to a 2012 Law Commission report “A warranty is a term in an insurance contract which carries particularly harsh consequences for the policyholder”. The following article explains in more detail what a warranty is and how important it is to comply with the terms of a warranty....
Examples of warranties: “It is warranted that stock contained in the lowest storey of the Buildings is kept on racks or stillages at least 15cm above the surface of the floor.” or “It is warranted that trade waste, cuttings and clippings are swept, gathered and bagged daily and removed from the premises at least once a week.”
“A warranty must be exactly complied with, whether material to the risk or not”. wow...this is incredibly harsh. So if you store stock at 10cm not 15cm and there is a theft of your computers, the insurer could throw out the whole policy (which would include not paying for the theft claim)
The theory is that if you are not good at keeping promises (which is effectively what a warranty is) then you should not benefit from insurance cover at all.
Thankfully this 18th Century attitude is at long last under review as there are moves afoot (hence the 2012 Law Commission report) to create a fairer response to breaches of warranty, particularly where the breach has no bearing on a claim, but for the foreseeable future, you ignore policy warranties at your peril !!
Conditions precedent to liability
If there is a condition that a burglar alarm is turned on and working whenever the property is unattended then as long as this is complied with at the time of a theft the claim will be paid even if it was not complied with at some other time.
If you had warranted (promised) that the alarm was turned on and working whenever the property is unattended, even if it was so at the time of the theft the insurer could avoid the claim if they could prove that it was not the case at any time during the policy year.
In other words..
Breach of a condition precedent to liability gives the insurer the opportunity to avoid any loss created by the breach, whereas breach of a policy warranty gives the insurer the opportunity to avoid the policy in its entirety, whether the breach is relevant to the loss or not and at any time during the policy year.
Warranties are nasty insurance terms designed to improve the premiums and cover for all people who insure but as the law stands at present, if you do not comply with a warranty literally you could be in for a shock if a claim arises.
For an insurance policy to be a valid and legal contract the policyholder must have an insurable interest in what is being insured.This is a long established principle from a time when insurance was in some ways another form of betting!
Client Check list
We aim to ensure that our clients have the best possible advice and fully understand the terms and conditions of their insurance policies including the clauses and conditions which could affect claims payments. To make sure they are given all the information about the policies and your obligations, we use checklists so that we don’t miss anything!
Do you know and understand:
1. The duty of disclosure to insurers?
2. What ‘material facts’ are, and the requirement to disclose these to insurers?
3. What a warranty is and the implications of failing to comply with it?
4. How to calculate a Gross Profit Sum insured?
5. How to choose an Indemnity period?
6. The basis of settlement for any claim?
7. Claims notification requirements and conditions?
8. The meaning of Insurable Interest?
9. All the subjectivities and conditions of the policy / policies?
10. The warning about financial history and claims history (including ‘incidents’)?
11. The effect of not complying with the above conditions or principles?
Retention of Liability Documents
Successful long tail liability claims as a result of a gradually operating cause are no longer unusual e.g. deafness or asbestos related claims can span 20 years or more. It is important that you retain indefinitely all liability policies both in your name or that of any company with whom you are or have been associated in the past. Additionally expired Employers Liability Certificates of Insurance should be retained for as long as possible. See additional information on our website and the Employers Liability details contained in this schedule.
It has been a legal requirement since 1999 to keep copies of all Employers Liability Certificates for a period of at least 40 years.
Also, where required by regulation 5 of the Employers' Liability (Compulsory Insurance) Regulations 1998 a copy of the Certificate of Employers' Liability Insurance should be displayed at each place of business where you employ persons covered by the policy. It is however, satisfactory to make the certificate available in electronic form, providing that it is reasonably accessible to relevant employees to whom it relates.
We also recommend that you retain the certificate as under current legislation, if no insurance records can be found at the time of any future claim, an employer could be held responsible for payment.
General Exclusions Applicable to all Policies
War and Similar Risks
The exclusion relates to loss or damage caused by ionising radiations or contamination by radioactivity from nuclear fuel or nuclear waste from the combustion of nuclear fuel. It also excludes radioactive, toxic, explosive or other hazardous properties of any nuclear explosive or nuclear component.
Excludes loss or damage caused by pressure waves from aircraft and other aerial devices travelling at sonic or supersonic speeds.
All damage caused by riot, civil commotion, malicious persons, unlawful, wanton or malicious acts, etc., occurring in the territory of Northern Ireland is excluded.
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