The Insurance Act 2015 is the single most important piece of commercial insurance legislation in the modern UK market. It replaced a body of law dating back to the Marine Insurance Act 1906 and rewrote the rules that govern how a business must present risk to its insurer. For every commercial buyer of professional indemnity insurance, the Act sets the standard, and the standard is the duty of fair presentation. Get the presentation right and the policy responds when it should. Get it wrong and the remedies available to the insurer can range from a proportionate reduction in a claim to avoidance of the contract altogether.
This reference explains the duty in plain English, walks through what section 3 actually requires, sets out whose knowledge counts under section 4, explains what "material" means under section 7, and describes the graduated remedies in Schedule 1. It closes with how the duty applies in practice across the regulated professions Apex Insurance Brokers serves, and where the broker's role begins and ends.
Before the Insurance Act 2015 came into force on 12 August 2016, the disclosure duty owed by a commercial insured to an insurer was governed by the Marine Insurance Act 1906. Section 17 of that Act set out the doctrine of uberrimae fidei — the "utmost good faith" — and sections 18 to 20 dealt with the disclosure of material circumstances and the effect of misrepresentation. The remedy was binary: any breach of the duty gave the insurer the right to avoid the contract from inception, keep the premium and refuse every claim, regardless of whether the undisclosed fact had any connection to the loss.
That regime worked poorly for modern commercial buyers. A minor, inadvertent omission at proposal — sometimes on a matter unrelated to the loss actually claimed — could void a policy on which a business had relied for years. The Law Commissions of England and Wales and of Scotland spent close to a decade consulting on reform, and Parliament enacted the Insurance Act 2015 to replace the 1906 duty for commercial contracts. Consumer buyers had already been separated out three years earlier under the Consumer Insurance (Disclosure and Representations) Act 2012 — usually abbreviated to CIDRA — which introduced a duty to take reasonable care not to make a misrepresentation. The 2015 Act completes the picture on the commercial side.
Section 3(1) of the Insurance Act 2015 states that "before a contract of insurance is entered into, the insured must make to the insurer a fair presentation of the risk". Section 3(2) gives that duty its name: the duty of fair presentation. It applies to non-consumer contracts — commercial buyers of insurance — at inception, at renewal, and to any variation of an existing contract.
Section 3(3) sets out the three components that a fair presentation must satisfy. Every commercial submission to the insurer market has to clear all three. Miss one and the presentation is not fair, and the insurer's remedies under Schedule 1 come into play.
First, disclosure of every material circumstance the insured knows or ought to know — or, failing that, disclosure that gives the insurer sufficient information to put a prudent insurer on notice that further enquiries are needed. This is set out in section 3(4). The Act builds in a signposting concept: if you cannot disclose everything specifically, you must at least point the insurer toward the areas that need investigation.
Second, the disclosure must be made in a manner which would be "reasonably clear and accessible to a prudent insurer" — section 3(3)(b). This was a deliberate response to the pre-2015 practice known as "data dumping", where an insured would provide an insurer with a very large volume of unindexed material and then argue after a loss that everything material had been "disclosed". The Act now requires the presentation to be structured and navigable, not just voluminous.
Third, section 3(3)(c) requires that every material representation of fact is "substantially correct" and every material representation of expectation or belief is "made in good faith". Section 7(5) explains that a representation of fact is substantially correct if a prudent insurer would not consider the difference between what was represented and what was actually correct to be material.
Section 3(5) provides useful protections. In the absence of enquiry, the insured does not have to disclose a circumstance which diminishes the risk, which the insurer knows or ought to know, which the insurer is presumed to know, or as to which the insurer waives information.
Section 7 supplies the definitional layer. Under section 7(3), a circumstance or representation 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". This is the classical test — it did not change with the 2015 Act — but section 7 codifies it and adds worked examples.
Section 7(4) lists things that "may be material circumstances", including special or unusual facts relating to the risk, any particular concerns which led the insured to seek cover, and anything which those working in the class of insurance and the field of activity in question would generally understand as something that should be dealt with in a fair presentation.
Section 7(1) confirms that the presentation need not be contained in a single document or oral presentation. It can be built up across a submission, a proposal form, meetings, and correspondence, provided the whole package meets the "reasonably clear and accessible" test.
One of the more practical questions the Act had to answer is: which people inside the insured organisation carry the knowledge that the duty attaches to? Section 4 answers it.
For an individual insured — a sole trader, for example — section 4(2) says the insured knows only what the individual knows and what is known to those who are responsible for the insured's insurance. For an insured which is not an individual (a company, a partnership, an LLP), section 4(3) says the insured knows only what is known to those who are part of the insured's senior management or responsible for the insured's insurance.
Section 4(8)(c) defines senior management as "those individuals who play significant roles in the making of decisions about how the insured's activities are to be managed or organised". This is a functional test, not a job-title test. A partner, a director, a head of practice, a compliance officer, an MLRO — anyone whose role includes shaping how the business operates — is likely to be in the group.
Section 4(6) adds a "reasonable search" duty. Whether the insured is an individual or not, the insured is treated as knowing what should reasonably have been revealed by a reasonable search of information available to the insured — whether by enquiries or by other means. Section 4(7) confirms that "information" for this purpose includes information held elsewhere in the organisation and by any other person, such as the insured's agent.
What section 4 does not do is impute to the insured every piece of routine transactional data sitting on the systems of a large firm. The point is that senior management and those responsible for the insurance are expected to run a reasonable search of the areas material to insurance — not to trawl every case file for every fact.
The graduated remedy structure in Schedule 1 is arguably the single most important commercial change the 2015 Act introduced. It replaced the "all or nothing" remedy of the 1906 Act with a scheme that tries to match the remedy to the culpability and the impact of the breach.
Paragraph 2 of Schedule 1 covers deliberate or reckless qualifying breaches. Where the breach falls into that category, the insurer may avoid the contract and refuse all claims, and need not return any of the premiums paid. This is the position closest to the pre-2015 regime.
Paragraphs 4 to 6 apply where the qualifying breach was neither deliberate nor reckless. The remedy depends on what the insurer would have done had the presentation been fair.
Part 2 of Schedule 1 applies a parallel scheme to breaches connected with variations of an existing contract. The burden of proving what it would have done sits with the insurer — the insurer has to demonstrate the counterfactual, not the insured.
Fair presentation is not an abstract concept for a firm buying professional indemnity insurance. The specific factors that are material vary by profession, but they cluster around similar themes: claims history, notifications, work mix, cyber posture, changes in the business, and the fitness and propriety of the principals.
Solicitors — the SRA-regulated firm needs to disclose its full claims and notifications history including anything reported under the Minimum Terms and Conditions in past years, its exposure to conveyancing and tax scheme work, its cyber controls, the composition of its principals, any recent SRA interventions or investigations, and changes in supervision or systems and controls. Firms in Scotland fall under the LSS Master Policy scheme and its own presentation regime.
Accountants — the ICAEW, ACCA and CIOT-regulated firm needs to disclose its audit versus advisory mix, exposure to tax scheme advice, any insolvency-adjacent engagements, disciplinary history at professional-body level, and the scale and nature of higher-risk client work.
Architects and construction professionals — the ARB-registered firm needs to disclose its higher-risk building work under section 135 of the Building Safety Act 2022, its cladding and fire-safety exposure, any collateral warranty positions and its retrospective liabilities under the extended limitation regime.
Financial advisers — the FCA-authorised firm needs to disclose its permissions, its defined-benefit transfer history, any pension review or SIPP exposure, FOS complaint history, changes in the network or DA status and the profile of its investment authorisations.
Engineers — the ICE, IStructE and Engineering Council-recognised firm needs to disclose safety-critical work, exposure under the Building Safety Act 2022, collateral warranty positions and its work across multiple discipline lines.
The broker owes its duty of care to the client, not to the insurer. That principle sits at the heart of how the fair presentation duty is discharged. The client remains responsible for the accuracy of the presentation, but the broker has a role to play in helping the client identify what a prudent insurer would want to know, in preparing a submission that is structured and accessible, and in advising on the questions the market is likely to ask.
The broker does not have independent knowledge of the client's affairs. If a firm fails to disclose a matter that only the firm knows, the broker cannot cure that failure. The Insurance Act 2015 rules on knowledge in section 4 apply to the insured, not to the broker. Under-disclosure via the broker is still a breach of the duty. Over-disclosure is generally safer than under-disclosure — the "reasonably clear and accessible" test in section 3(3)(b) means the answer to uncertainty is to disclose and structure, not to withhold.
At Apex, the placement process is designed with the fair presentation duty in mind. The submission to insurers is prepared with an eye on what section 7 identifies as material — the special features of the risk, the particular concerns of the insured, and the practices of the class of insurance. Where a firm is uncertain whether a fact is material, the assumption is that it is.
The duty of fair presentation applies at renewal in the same way it applies at inception. In practice, several patterns recur.
Prior notifications that the firm has decided "went nowhere" are often left out of the renewal submission. Under section 7(4)(b) — particular concerns which led the insured to seek cover — a notification is capable of being material even where the underlying matter closed without a claim. The safer approach is to disclose and explain.
Claims from more than five or six years ago are sometimes assumed to have dropped off the disclosure requirement. There is no time-limit rule in the Insurance Act. If a historic claim is material — for example because it evidences a pattern or a systemic issue — it should be disclosed.
Management structure changes, mergers and lateral hires can be under-disclosed. Section 4 identifies senior management knowledge as the touchstone for corporate insureds. Changes at that level are almost always material to a PI insurer's judgment of the risk.
Insurance history at prior insurers, particularly declined risks or policies not renewed, is sometimes omitted. Insurers regularly ask about it and it is almost always material.
Overseas work and new client sectors are frequently under-disclosed where the firm sees them as ancillary. Material for insurance purposes is not the same as material for management-accounting purposes.
Apex Insurance Brokers is an FCA-authorised general insurance intermediary specialising in professional indemnity insurance for the regulated professions. Fair presentation is a core part of the placement process — the client's submission is prepared with the duty in mind, structured to be accessible to the underwriter, and reviewed with the firm before it is sent. Where a firm is uncertain whether a particular fact or circumstance needs to be disclosed, the working assumption in the Apex process is that it does. The responsibility for the accuracy of the presentation remains with the firm; the broker's role is to structure it, to prompt on the areas the market is asking about, and to advise on how to present the risk in a way that meets the section 3 standard.
The duty of fair presentation is the obligation, set out in section 3 of the Insurance Act 2015, for a commercial insured to disclose every material circumstance it knows or ought to know before a contract of insurance is entered into, to make that disclosure in a manner reasonably clear and accessible to a prudent insurer, and to ensure that every material representation of fact is substantially correct and every material representation of expectation or belief is made in good faith. It applies at inception, at renewal and at any variation of an existing contract.
The remedies are set out in Schedule 1. If the breach was deliberate or reckless, the insurer may avoid the contract, refuse all claims and retain the premium. If the breach was neither deliberate nor reckless, the remedy is graduated: the insurer may avoid the contract (with return of premium) if it would not have written the risk at all, may apply different terms if it would have written on other terms, or may reduce the claim proportionately if it would have charged a higher premium. The burden of proving the counterfactual sits with the insurer.
Section 4 of the Act attaches the knowledge of the insured to those who are part of senior management — defined in section 4(8)(c) as those individuals who play significant roles in the making of decisions about how the insured's activities are to be managed or organised — and to those who are responsible for the insured's insurance. In a partnership or LLP, that will typically include the partners, the managing partner, the head of practice and the compliance officer. The Act also imposes a reasonable search duty under section 4(6).
No. The Insurance Act 2015 duty of fair presentation applies to non-consumer contracts. Consumer buyers are covered by the Consumer Insurance (Disclosure and Representations) Act 2012, which requires the consumer to take reasonable care not to make a misrepresentation to the insurer. The remedies under the 2012 Act are also graduated but the underlying test is different.
Section 7(3) of the Act defines a circumstance as material if it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms. In the context of professional indemnity insurance for the regulated professions, that typically includes the firm's claims and notifications history, the composition of its work, any exposure to higher-risk sectors, cyber posture, the profile of the principals, changes in management or systems, disciplinary history at professional-body level and — where applicable — exposure to statutory regimes such as the Building Safety Act 2022.
The broker's duty of care runs to the client, not to the insurer. In practice the broker helps the firm identify what a prudent insurer would want to know, prepares a submission that meets the "reasonably clear and accessible" test in section 3(3)(b), advises on the specific questions likely to arise in the market, and reviews the presentation with the firm before it is sent. The firm remains responsible for the accuracy of the information; the broker cannot supply knowledge the firm does not disclose.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952.