March 10, 2016

No, the Insurance Act is not what you do when you agree to pay someone some money every month in the hope that if and when a specified bad thing happens they will give you some money to make the bad thing and its consequences seem less bad after all. The Insurance Act is why insurance professionals should be afraid, very afraid, of regulators’ red tape once again.

Basically, it’s some new law or something that says insurers, brokers and policyholders have to be “fair” all the time. Or some such nonsense. Hopefully, we’ll be rid of all this kind of thing once Britain heads for the door marked Brexit and no-one can ever again tell us what to do.

Lawyers Colin Wynker and Stuart Hell of upstart law firm Wynkerhell told Insurance Ape this week that the Insurance Act is chock-full of pitfalls for insurance brokers, who should not even think about doing anything without taking immediate legal advice from Wynkerhell ELP.

The new Act, Wynker and Hell told Ins Ape, brings the act of gathering information for disclosure into a special new kind of focus, one that is apparently “wholly different from what has gone before”. Hopefully, you’ve been paying attention and will know what went before. If not, I’m afraid, it’s no good looking to Bankstone News for any kind of “previously on insurance disclosure” type summary.

By trying to rescue policyholders from having their policies repudiated by insurers following a claim, just because they forgot to mention some utterly trivial and irrelevant circumstance, the regulator has, they say, inadvertently constructed a cunning trap (a pitfall, if you will) for brokers.

Ironically, it’s all to do with the word “reasonable”. Policyholders are now required to go through a “reasonable” search before presenting their unwanted risks to insurers. Now that might sound reasonable enough to you or I, Dear Reader, but in legal land things are never quite what they seem.

Reasonableness, when you come to think about it properly, is actually a surprisingly tricky thing to pin down. Luckily, Messers W and H are ready with a helpful definition. Reasonable, they clarify, means “nothing or everything.” Which is good to know, of course, but also strangely unsatisfying as a definition.

On which basis, you might be starting to think that it’s not entirely reasonable for the Act to rely on the word reasonable as a reasonable yardstick against which to measure the reasonableness of anything else. If you’re sensing a certain uneasiness and confusion at this point, Bankstone News feels your pain. We really do. And so, they want to make out, do Wynker and Hell. But do they? Do they really?

Whilst lawyers will make out they’re all sad about poor brokers getting scewered on the horns of ‘reasonable’ – and thus ending up in the firing line when it turns out their clients didn’t search sufficiently reasonably for things they might reasonably have had reason to mention to insurers in order for a reasonable underwriter to ask reasonable questions with a view to reasonably assessing the reasonableness of taking on a risk – secretly, they couldn’t be more delighted!

Arguing about protean words like reasonable (a favourite also of politicians, tellingly, who like to talk about ‘all reasonable people’ (cf. ‘all right-minded people’) being in favour of whatever wickedness they’re currently planning to perpetrate) gives lawyers something to argue about, and hence – on the time-honoured ‘time is money’ principle – something to charge large sums of money for.

Smaller brokers risk exposing themselves to risk, H&W warn. And ‘reasonable’ is the main reason why. Best get some proper legal advice you start exposing yourself too.

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