Insurance law change will increase burden on farmers

Farmers are facing tighter controls on business insurance as new legislation comes into force next month.

The changes, from 12 August, have been branded as the biggest shake-up in insurance law for more than a century.

Insurance experts are warning farmers that setting up policies will take far longer and could involve all staff across the farm.

The Insurance Act 2015 will enforce a duty of “fair presentation” requiring businesses to provide evidence that they have carried out a more rigorous and thorough assessment of risks.

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This could include providing further evidence from third parties like accountants and other professionals the business works with.

Insurance Act 2015

Policyholders will have to ask anyone on the farm benefitting from cover whether they know any material information in relation to the risk.

There will be an explicit duty to ask questions of the whole business prior to renewal, not just senior staff.

All information will have to be presented clearly and accessibly to the insurer.

For example handing over data in an unstructured format will not meet the new standard.

The level of questioning and information gathering required to prepare for renewals may increase significantly.

Third parties such as accountants or IT providers may also need to be consulted over potential risks.

Anyone found to have deliberately withheld the full facts, faces having their policy being voided. In these cases, no claims will be met and there will be no refunds of any insurance premiums.

Famers face greater responsibility

Harrison and Hetherington (H&H) insurance brokers said farmers should be aware that there will be more responsibility on them to share all relevant information with their brokers.

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Operations director at H&H, Paul Graham, said that understanding the implications of the new Act was complex and it was vital for all businesses to know what was required of them.

“It’s terribly important that farms and rural businesses better prepare their information.

“It is their responsibility to disclose the information and our responsibility to ask about the business, so expect to be asked more questions when applying for or renewing insurance.”

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Although insurance contracts will still be based on good faith, the onus is now on customers to fairly present any risks to their brokers, Mr Graham said.

The information must be correct to the best of the customer’s knowledge, and there is also a requirement for customers to carry out a reasonable search for information to ensure they are presenting the full facts, he added.