Proportionate remedies under the Insurance Act 2015

Category: Insurance law · Reviewed by the Apex broking team · Last reviewed 2026-08-22 · ~4 min read

What Schedule 1 does

Before the Insurance Act 2015 the only remedy for material non-disclosure or misrepresentation in a business policy was avoidance: the contract was unwound from inception and every claim under it failed, however innocent the failure and however small its effect. Schedule 1 replaced that all-or-nothing rule with a set of remedies proportionate to the breach. This entry deals only with the remedies. The duty itself — what a fair presentation is, and what counts as a qualifying breach — is covered in our fair presentation deep dive and in fair presentation of the risk.

The gateway: was the breach deliberate or reckless?

Everything turns on this first question. A breach is deliberate or reckless if the insured knew it was in breach of the duty of fair presentation, or did not care whether it was. If it was, the insurer may avoid the contract, refuse all claims, and need not return any of the premium. If it was not — the ordinary case of an honest mistake, an overlooked fact or a failure of internal enquiry — the remedy depends entirely on what the insurer would have done had the presentation been fair.

Remedy one: the insurer would not have written the risk

Where the insurer would not have entered into the contract at all on any terms, it may avoid the contract and refuse all claims — but it must return the premiums paid. This is the closest of the three to the old law, and it is deliberately harder to reach: the insurer has to establish that no terms and no premium would have made the risk acceptable to it.

Remedy two: different terms

Where the insurer would have entered into the contract but on different terms, other than terms relating to the premium, the contract is treated as if it had been entered into on those different terms, if the insurer so requires. In practice that means an exclusion, a condition, a warranty or a sub-limit the insurer would have imposed is read into the policy retrospectively, and the claim is then assessed against the policy as so amended. If the claim would have fallen outside the terms the insurer would have written, there is no recovery, without any need to avoid.

Remedy three: the proportionate premium reduction

Where the insurer would have written the risk on the same terms but for a higher premium, it may reduce proportionately the amount to be paid on a claim. The statutory formula is X = (P ÷ P′) × 100, where P is the premium actually charged and P′ is the higher premium the insurer would have charged. The insurer need pay only X% of what it would otherwise have been obliged to pay.

The arithmetic, worked through

The formula is a simple ratio, and it is easiest to read it that way. If the premium actually charged was half what the insurer would have charged on a fair presentation, P ÷ P′ is 0.5, X is 50, and the insurer pays half of what it would otherwise have paid. If the premium charged was four-fifths of the correct premium, X is 80 and the insurer pays 80% of the claim. If the premium charged was nine-tenths, X is 90.

Three points follow from the mechanics. First, the reduction bites on the amount otherwise payable, so it is applied after the policy has been construed and after the excess and any limit have been applied — it is not a discount on the loss. Second, it applies to every claim under the contract, not just the one that exposed the breach. Third, the burden is on the insurer: it has to show what premium it would in fact have charged, which is an evidential question about its own underwriting, not a matter of assertion. The arithmetic is trivial; the argument is always about P′.

Variations and mid-term changes

Schedule 1 also deals with breaches occurring on a variation rather than at inception. Broadly, where the breach relates only to a variation, the remedies operate on the variation rather than on the whole contract: the variation can be treated as never having been made, or as made on different terms, or the proportionate reduction can be applied to claims arising out of events after the variation. Where the total premium was increased on the variation, the same ratio approach is used against the varied premium.

What this means in practice

The practical effect of Schedule 1 is to make the underwriting file the centre of any coverage dispute. An insured facing a proportionate reduction should be asking to see the rating basis relied on and how the higher premium was arrived at. An insured making a presentation should be recording what was disclosed, to whom and when, because that record is what defeats an allegation that a breach was deliberate or reckless. Note that consumers are outside this regime entirely — their position is governed by CIDRA 2012, which has its own, similar but separate, proportionate scheme. Terms not relevant to the actual loss are dealt with separately again under section 11.

Frequently asked questions

Can an insurer still avoid a business policy for non-disclosure?

Only where the breach of the duty of fair presentation was deliberate or reckless, or where the insurer would not have entered into the contract at all on any terms. In the second case the premium must be returned.

How is the proportionate reduction calculated?

X = (P divided by P prime) multiplied by 100, where P is the premium actually charged and P prime is the higher premium the insurer would have charged. The insurer then pays X per cent of what it would otherwise have paid.

Does the reduction apply to one claim or all of them?

It applies to claims under the contract generally, not only to the claim that brought the breach to light. That is why an unresolved presentation issue affects the whole policy year.

Related entries

• Insurance Act 2015: fair presentation deep dive
• Fair presentation of the risk
• Section 11, Insurance Act 2015
• Section 12, Insurance Act 2015
• CIDRA 2012
• Non-disclosure vs misrepresentation

This entry is part of the Apex Insurance Wiki. Position stated as at August 2026. Last reviewed 2026-08-22. Next review: 2027-02-22. It is general insurance information, not legal advice, and not regulated advice on a specific policy.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.