Full Disclosure Guidance

When you complete an application for professional indemnity insurance, you must provide full disclosure of material information. This requirement increases the burden on the person responsible for arranging the insurance cover because material information is defined as 'any information that will influence an underwriter's rating or decision on providing cover'.

Some insurers will offer their terms with a relatively small amount of information about the risk they are being asked to insurer. On the face of it, this seems to benefit the proposer because it means less form filling and time saving. However, in practise it can create serious non-disclosure problems for the Insured. Just because a shortened proposal form doesn't ask a particular question, it doesn't mean the insurer doesn't need to be informed.

Quite simply, the less information you provide about your firm, the more chance there is of something important not being disclosed, leading to a breach in the policy obligations. This could be a historic claim, new areas of work being undertaken mid-term, a new subsidiary business or entity, an additional office, an employee disciplinary - the scope is almost endless especially for growing businesses with employees and directors or partners. Unless full disclosure is given at all times, a firm runs the serious risk of a claim not being covered or their policy being cancelled.

The Insurance Act

Full disclosure of material information can be a grey area and the most common cause of disputes between policyholders and their Insurer. That's why the Insurance Act was introduced in 2016. The Act was the culmination of several year’s work by the Law Commission in conjunction with Insurers, Brokers and their Customers. It's designed to reflect the requirements of the modern insurance market and reflects best practice in the UK insurance industry. For more information about the Act you can read our guide here.

 

DISCLAIMER This guidance note is intended for information purposes only. Whilst all care has been taken to ensure the accuracy at the time of writing, it is not a reliable substitute for specific insurance advice. For advice about this topic, please contact us or your current brokers. This guidance note shall not be reproduced in any form without our prior permission. © Professional Indemnity Insurance Brokers Ltd