Darren Bagnall of Flat Living Insurance details your responsibility to make a fair presentation when you arrange your flats insurance in 2022.

The Insurance Act 2015 stipulates that policyholders must ‘make a fair representation of the risk’ prior to their policy commencement date.

The acts states that “a fair representation is one that discloses, in a manner that is reasonably clear and accessible, every material circumstance which is known or ought to be known by the policyholder’s senior management, or those responsible for arranging insurance, following a reasonable search.”

In English, this means that insurers are within their rights to void an insurance contract or charge a higher rate (and therefore an increased premium) to policyholders who do not tell the whole truth and nothing but the truth about their building when shopping for a policy. The key elements you should bear in mind to ensure you adhere to this stipulation are below:

‘Material Circumstance’

This involves anything that might influence the insurer in their overall decision to insure as well as what may be included in the cover and what premium they may charge. Things to include would be any factors relating to the property such as prior claims and the construction of the block as well as the financial history of the directors and your business activities.

‘Known or Ought To Be Known’

This means that yes, you should be disclosing anything and everything you know, but also anything and everything you ought to know as the person arranging the insurance. For the purposes of the Act, your knowledge includes (but is not limited to) the knowledge of the current board members, directors and any residents that have previously been directors of the RMC.

If the information is available to you, it is expected that you will take the time to seek it out and present it to the insurer. If you don’t, you will have breached your duty to fairly represent the risk. Your insurer should offer some guidance here but some common areas that may require some digging are:

• Checking the accuracy of your claims history and experience
• The construction of the building
• The areas covered by flat roofs and the type of materials used
• If you have any cladded areas, what the cladding is made out of and whether it is flammable

‘Reasonably Clear and Accessible’

This simply means that information should be presented to insurers in as clear and simple a way as possible, without any ambiguity.

Key facts shouldn’t have to be found among large volumes of irrelevant material, for example.

All forms completed and documents provided should be completed in full and the information should be true and accurate (and should be completed following a reasonable search and after consulting with senior management).

Other Information You Should Provide

Here are some examples of ‘material information’ that should be shared with your insurer:

• Changes to the block’s construction e.g. the addition of cladding
• Changes to how the properties are used e.g. if any flats are used as holiday lets, second homes or student accommodation, or if a business is being run from any of the units.
• If any significant extensions, renovations or alterations are planned
• Details of insured or uninsured matters to do with loss/claims/potential claims circumstances
• Any criminal convictions, regulatory investigation or enforcement or health and safety investigation or prosecution in connection with the block and/or the directors
• Details of any previous insurance that was declined, refused renewal, had imposed terms or restrictions in cover or any mid-term cancellations.

What Happens if You Don’t ‘Fairly Present’ The Risk?

Insurers will respond accordingly, bearing in mind the nature of the breach and what may have happened if you had fairly presented the risk from day one.

If you deliberately or recklessly breach your obligations, insurers may void the policy altogether. In this instance they will retain all premiums while negating the policy and not paying out for any claims. You may even be asked to repay any claims already made.

If you accidentally fail to represent the risk fairly, the insurer is more likely to act based on what would have happened if you had complied with your obligations from the beginning.

For example:

• If the insurer would not have provided the policy at all, they may void the policy as above but would have to pay back any premiums received up to this point.
• If the insurer would have provided the policy but on different terms, the policy would remain in place but would be treated as if the correct terms had been in place from day dot. This means that claims may not be paid either in part or in full.
• If the insurer would have provided the policy as it is but at a higher premium, they may reduce any payment being claimed in line with the difference between the premium charged and the premium that should have been charged. This could result in a significant reduction in a claim as, for example, if the premium should have been double what was being paid, a claim amount may well be halved in response.

In summary, always include anything and everything you believe to be relevant to avoid serious implications when it comes to a claim. If in any doubt, speak to your account handler for guidance.

Flat Living Insurance provides specialist insurance policies for blocks of flats and apartments. For more information or a quote, please contact a member of the Flat Living Insurance team on 0333 577 2044.