A Bristol precision-engineering firm sits down with its broker eight weeks before renewal. Turnover is up forty per cent on last year, the company has just won its first contract supplying a Tier 1 aerospace OEM, a director has taken on a new role overseeing quality assurance, and the night-shift supervisor — unknown to the board — was cautioned eighteen months ago for a workplace altercation. The renewal submission goes out. Nine months later there is a fire. The insurer asks: what did you know, when did you know it, and what did you tell us?
That conversation — whose answer used to turn on Victorian common-law concepts and a 1906 statute drafted for ships — is now governed by the Insurance Act 2015. This article is the pillar of our ten-part series on the Act. It explains what the legislation does, who it binds, the four reform areas every commercial insured should understand, and the practical implications at placement, mid-term and claim. The supporting articles drill down into each topic; this one gives you the map.
Why the Act exists: a short history
For more than a century, English commercial insurance law was anchored in the Marine Insurance Act 1906, which codified the common-law doctrine of uberrimae fidei — utmost good faith. Section 17 of the 1906 Act imposed a positive duty on the insured to disclose, before contract, every “material circumstance” known to them. Sections 18 to 20 fleshed out what that meant. The remedy for breach was binary and brutal: the insurer could avoid the policy from inception, returning the premium and walking away — even if the non-disclosure was innocent, unrelated to the loss, and the policy would still have been written on identical terms had the information been provided.
That regime worked in 1906, when most commercial insurance was marine, placed by sophisticated brokers at Lloyd’s between repeat counterparties. It worked far less well a century later, when a small business buying a packaged commercial combined policy faced the same draconian remedy for an innocent mistake about, say, a director’s twenty-year-old motoring conviction.
The Law Commission of England and Wales and the Scottish Law Commission launched a joint review of insurance contract law in 2006. Over eight years they published consultation papers, issues papers and a final report (Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment, Law Com No 353 / Scot Law Com No 238, 2014). The consumer side was addressed first, through the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA), which replaced the consumer’s duty of disclosure with a duty to take reasonable care not to make a misrepresentation. The commercial side followed with the Insurance Act 2015, which received Royal Assent on 12 February 2015 and whose substantive provisions commenced on 12 August 2016.
The Act therefore applies to contracts of insurance entered into, varied or renewed on or after 12 August 2016. Pre-2016 contracts remain governed by the 1906 Act regime; the bulk of the UK commercial book is now under the new rules.
Scope: who is in and who is out
The Act applies to non-consumer (commercial) insurance contracts subject to the laws of England and Wales, Scotland or Northern Ireland. That captures:
- UK commercial insureds of all sizes, from sole traders buying a small package policy through to FTSE 100 risks placed in the London market
- UK-domiciled brokers and intermediaries acting on those placements
- Managing General Agents (MGAs) and delegated authority binders writing UK commercial business
- The Lloyd’s market and the company market in respect of UK commercial contracts
- Reinsurance contracts (the Act expressly applies)
It does not apply to consumer insurance contracts, which remain governed by CIDRA 2012. The dividing line is in CIDRA s.1: a consumer insurance contract is one entered into by an individual “wholly or mainly for purposes unrelated to the individual’s trade, business or profession.” A sole-trader plumber buying van insurance for business use is a commercial insured under the 2015 Act; the same person buying personal motor cover is a consumer under CIDRA.
The Act also does not displace the broader regulatory regime — FCA rules in ICOBS, the Senior Managers and Certification Regime, Consumer Duty (where relevant), and product governance under PROD all continue to apply alongside it.
The four reform areas
The Act addressed four distinct problems with the old law. Each is the subject of its own article in this series; what follows is the overview.
1. The duty of fair presentation (s.3 to s.7)
The headline reform. Section 3 replaces the old duty of disclosure with a new, more structured duty of fair presentation of the risk. Before a contract is entered into, the insured must:
- disclose every material circumstance the insured knows or ought to know, or give the insurer sufficient information to put a prudent insurer on notice that it needs to make further enquiries (s.3(4));
- make that disclosure in a manner that is reasonably clear and accessible to a prudent insurer (s.3(3)(b)); and
- ensure every material representation as to a matter of fact is substantially correct, and every material representation as to a matter of expectation or belief is made in good faith (s.3(3)(c)).
Three features deserve emphasis. First, the “data dump” problem is now expressly addressed: bundling every piece of information into an unindexed appendix does not discharge the duty. Second, the Act introduces a structured concept of the insured’s knowledge (s.4) — what individuals count as the insured for these purposes, including senior management and those responsible for arranging the insurance — and the insurer’s knowledge (s.5), including what the insurer is presumed to know and what it ought to know. Section 6 deals with general points on knowledge and s.7 is supplementary. Third, “material circumstance” carries forward the Pan Atlantic v Pine Top [1995] 1 AC 501 test — a circumstance is material if it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms.
For a deeper treatment, see our companion articles on the duty of fair presentation and the material circumstance test.
2. Warranties (s.9 to s.11)
The pre-2015 law on warranties was notoriously harsh. A warranty was a term that had to be strictly complied with; any breach, however trivial or unrelated to the loss, automatically and permanently discharged the insurer from liability from the date of breach — even if the breach was remedied before the loss.
The Act reforms this in three steps:
- s.9 abolishes “basis of the contract” clauses, by which insurers used to convert every answer on a proposal form into a warranty. Any representation made by the insured in connection with a proposed contract cannot be converted into a warranty by means of any provision of the contract or otherwise.
- s.10 abolishes the automatic-discharge rule. A breach of warranty now suspends the insurer’s liability for the period of the breach. Once the breach is remedied (where capable of remedy), cover resumes. The insurer remains liable for losses occurring outside the period of breach.
- s.11 introduces the doctrine of terms not relevant to the actual loss. Where a term (including a warranty, a condition precedent, or an exclusion) is directed at reducing the risk of a particular type of loss, or loss at a particular location or time, the insurer may not rely on non-compliance to refuse a claim if the insured can show that the non-compliance could not have increased the risk of the loss that actually occurred in the circumstances in which it occurred.
The practical effect is substantial. A breached alarm-warranty no longer voids cover for a flood loss; a missed inspection certificate on machinery in one location no longer defeats a claim arising at a different location. See our articles on warranties under the Insurance Act 2015, terms not relevant to the actual loss, and conditions precedent versus warranties post-Act.
3. Remedies for breach of the duty of fair presentation (s.8 and Sch 1)
Under the old law, every breach of the duty of disclosure — innocent, negligent or deliberate — produced the same remedy: avoidance. The Act introduces proportionate remedies keyed to the insured’s state of mind. The mechanism is in s.8, and the detail is in Schedule 1.
The first question is whether the breach was deliberate or reckless. If it was, the insurer may avoid the contract, refuse all claims, and need not return the premium (Sch 1, paras 2 to 3). If it was not, the remedy depends on what the insurer would have done had a fair presentation been made:
- if the insurer would not have entered the contract at all, it may avoid the contract and refuse all claims, but must return the premium (Sch 1, para 4);
- if the insurer would have entered the contract on different terms (other than premium), the contract is treated as if it had been entered into on those terms (Sch 1, para 5);
- if the insurer would have charged a higher premium, claims are proportionately reduced by the ratio of premium actually charged to premium that would have been charged (Sch 1, para 6).
The shift from a single binary remedy to a graduated scale is, for most insureds, the single most consequential change in the Act. Our remedies article walks through worked examples.
4. Fraudulent claims (s.12)
Section 12 codifies the common-law rules on fraudulent claims and clarifies the insurer’s remedies. Where the insured commits a fraud in relation to a claim, the insurer:
- is not liable to pay the claim;
- may recover any sums already paid in respect of the claim; and
- may, by giving notice to the insured, treat the contract as terminated with effect from the time of the fraudulent act. If it does so, the insurer need not return any premium, and it is not liable in respect of any “relevant event” occurring after the time of the fraudulent act, but remains liable for legitimate losses occurring before that time.
Section 12 sits alongside the common-law “fraudulent devices” doctrine (see Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2016] UKSC 45, which constrained the doctrine in respect of collateral lies).
Section 13A: late payment damages
Section 13A was inserted into the Insurance Act 2015 by the Enterprise Act 2016 and came into force on 4 May 2017. It implies a term into every insurance contract that the insurer must pay sums due within a reasonable time of a covered claim being made. What is reasonable depends on factors including the type of insurance, the size and complexity of the claim, compliance with relevant statutory or regulatory rules, and factors outside the insurer’s control.
Breach gives the insured a damages claim for late payment over and above the sum payable under the policy. The provision is subject to a one-year limitation period running from the date of payment of all sums due (Limitation Act 1980, s.5A). See our article on late payment of claims for detail, including the leading authority Quadra Commodities SA v XL Insurance Company SE [2022] EWHC 431 (Comm) and subsequent appellate guidance.
Contracting out: Part 5 transparency
The default position of the Act is policyholder-friendly. Part 5 (s.15 to s.18) allows insurers to contract out of most of the Act’s provisions in non-consumer contracts — but only if they satisfy the transparency requirements in s.17:
- the insurer must take sufficient steps to draw the disadvantageous term to the insured’s attention before the contract is entered into or varied; and
- the term must be clear and unambiguous as to its effect.
Whether sufficient steps have been taken is judged with reference to the characteristics of insureds of the kind in question and the circumstances of the transaction. Contracting out of the prohibition on basis-of-the-contract clauses (s.16(1)) and of s.12 in respect of deliberate or reckless fraud is not permitted; otherwise the parties may contract out subject to s.17.
Our contracting out article examines the case law on what counts as “sufficient steps”, including Ristorante Limited t/a Bar Massimo v Zurich Insurance plc [2021] EWHC 2538 (Ch) and the commentary that has followed.
The fate of utmost good faith
A point that often confuses readers. Section 14(1) of the Act amends the Marine Insurance Act 1906 so that any rule of law permitting a party to avoid a contract on the ground of breach of the duty of utmost good faith is abolished. Section 17 of the 1906 Act is amended in line with that.
But s.14 does not abolish the duty of good faith itself. It abolishes the avoidance remedy for breach of that duty. Good faith survives as an interpretive principle — relevant to how the contract is construed and to how the parties conduct themselves, but no longer a free-standing route to rescission. Section 13 of the Act preserves that interpretive role expressly.
Who is affected, and how it bites
The Act binds the insured, the insurer and (in practical terms) the broker who arranges the placement. Three populations feel it most:
- UK commercial insureds, who now owe the duty of fair presentation and benefit from the proportionate remedies and warranty reforms.
- Brokers and MGAs, whose process at placement — what they ask, how they record it, how they present the submission — is the front line of compliance with s.3.
- Insurers and the Lloyd’s market, whose underwriting questions, policy wordings and claims handling all need to align with the Act’s structure (and, where they wish to depart from it, with the s.17 transparency requirements).
The financial regulators have not issued bespoke rules under the Act, but FCA expectations on fair value, product governance and conduct mean that an insurer or broker whose process produces systematic Act compliance failures will be exposed to regulatory as well as contractual risk.
What changed at placement, and what changed at claim
A broker’s-eye summary.
At placement:
- Submissions must be structured, indexed and signposted. A 400-page data room without a guide does not discharge s.3.
- The broker’s enquiry of the insured must extend to the right people: senior management, those responsible for arranging insurance, and (subject to s.4(6) and reasonable search) those whose knowledge would reasonably be expected to be revealed by a reasonable search.
- Basis clauses are gone. Proposal answers no longer convert silently into warranties.
- Warranties and conditions precedent must be drafted with s.10 and s.11 in mind, and disadvantageous variations from the Act’s defaults must comply with s.17.
At claim:
- Remedies for non-disclosure are now proportionate, not binary — making the underwriter’s “what would you have done” evidence central to coverage disputes.
- A breach of warranty unrelated to the loss no longer defeats the claim (s.11).
- A breached but remediable warranty no longer permanently discharges cover (s.10).
- Late payment can sound in damages under s.13A.
- Fraudulent claims have a codified, more predictable remedy under s.12.
The rest of this series
This pillar article sits at the centre of a ten-part programme. The supporting articles are:
- The duty of fair presentation under the Insurance Act 2015
- The material circumstance test
- Warranties under the Insurance Act 2015
- Terms not relevant to the actual loss (s.11)
- Remedies for breach of the duty of fair presentation
- Contracting out under Part 5
- Conditions precedent vs warranties post-Act
- Late payment of claims (s.13A)
- The Insurance Act 2015 and PI claims
Frequently asked questions
When did the Insurance Act 2015 come into force? The Act received Royal Assent on 12 February 2015. The substantive provisions commenced on 12 August 2016 and apply to contracts of insurance entered into, varied or renewed on or after that date. Section 13A on late payment was inserted by the Enterprise Act 2016 and came into force on 4 May 2017.
Does the Insurance Act 2015 apply to consumer insurance? No. Consumer insurance contracts are governed by the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA). The 2015 Act applies to non-consumer — that is, commercial — insurance contracts. A sole trader buying business cover is a commercial insured; the same person buying personal cover is a consumer.
What is the duty of fair presentation? The duty introduced by s.3 of the Act. Before contract, the commercial insured must disclose every material circumstance it knows or ought to know — or give the insurer sufficient information to put a prudent insurer on notice that it should ask further questions — in a manner reasonably clear and accessible to a prudent insurer, and must make any representations of fact substantially correct and any of expectation or belief in good faith.
Did the Act abolish utmost good faith? Not entirely. Section 14(1) abolished the remedy of avoidance for breach of the duty of utmost good faith under s.17 of the Marine Insurance Act 1906. The duty itself, and its role as an interpretive principle, survives — see s.13 of the 2015 Act.
What happens if I breach a warranty under the Insurance Act 2015? Under s.10 the insurer’s liability is suspended for the period of the breach rather than permanently discharged. Once the breach is remedied (where capable of remedy), cover resumes. Section 11 may also prevent the insurer relying on non-compliance with a risk-mitigation term where the breach could not have increased the risk of the loss that actually occurred.
Can insurers contract out of the Insurance Act 2015? In non-consumer contracts, mostly yes, under Part 5. But disadvantageous terms must satisfy the transparency requirements in s.17 — the insurer must take sufficient steps to draw the term to the insured’s attention before contract and the term must be clear and unambiguous in effect. The prohibition on basis-of-the-contract clauses and s.12 in respect of deliberate or reckless fraud cannot be contracted out of.
What remedies does an insurer have for non-disclosure under the Act? Section 8 and Schedule 1 set out proportionate remedies. Deliberate or reckless breaches allow avoidance, refusal of claims and retention of premium. For innocent or negligent breaches the remedy depends on what the insurer would have done with a fair presentation: avoidance with premium refund if it would not have written the risk, contract treated as written on different terms, or proportionate reduction of claims to reflect the higher premium that would have been charged.
Does the Insurance Act 2015 affect how quickly insurers must pay claims? Yes. Section 13A, inserted by the Enterprise Act 2016, implies a term that the insurer must pay sums due within a reasonable time. Breach gives a damages claim subject to a one-year limitation period running from the date of final payment.
Related articles
- The duty of fair presentation under the Insurance Act 2015
- The material circumstance test under the Insurance Act 2015
- Warranties under the Insurance Act 2015: reform and practical effect
- Terms not relevant to the actual loss: section 11 explained
- Remedies for breach of the duty of fair presentation
- Contracting out under Part 5 of the Insurance Act 2015
- Condition precedent versus warranty post-Insurance Act
- Late payment of claims under section 13A
- The Insurance Act 2015 and professional indemnity claims
Reviewed by the Apex Insurance Brokers technical team, May 2026. Apex Insurance Brokers Ltd is authorised and regulated by the Financial Conduct Authority (firm reference 724952) and is registered in England and Wales (Companies House 07014570). This article is general guidance and is not legal advice; insureds should take advice on specific facts.