Commercial Insurance: The Importance of Full Disclosure

Insurers have a duty to protect your business for everything which you disclose in the policy but if you omit certain aspects, accidentally or not, it could result in prospective claims being rejected. Brokers can shoulder this responsibility for you.

Research shows that over the last 24 months, more than 10% of commercial insurance applicants have had a claim contested due to nondisclosure. It is accepted this is mainly owing to confusion and business owners not even realising it is their responsibility to disclose certain things on a policy. It’s an insurance act dating back over a century ago that obliges applicants to full disclosure…

The Marine Insurance Act 1906: “The assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure, the insurer may avoid the contract.”

A complete reform is already in discussion and we could soon see commercial insurance buyers required to disclose less information on their policy – shifting more responsibility onto insurers to look into the applicant data. If the insurer then fails to identify a certain detail, then it will be deemed as their fault.

Until then, brokers can take care of everything.

Professional brokers work closely with their clients and comb through every necessary detail to make sure the policy is transparent on both ends – the applicant and the insurer.

How does a genuine broker operate?

Much has been made of ‘ghost brokers’ by the media in recent weeks and there are fears genuine brokers could be caught in the crossfire. Always get in touch with a long-established business liability insurance broker to avoid falling victim to fraud.

Real brokers gather every bit of relevant information from the applicant, to thoroughly assess their insurance needs and level of risk.

In the meantime, their job is to develop strong relationships with insurance providers – via a range of mediums including face-to-face meetings. It is near impossible to build such relationships without that personal touch.

With the applicant details and custom policy at-hand, the broker can then negotiate with their contacts in the insurance sector for the best quote. They have more leverage when it comes to ‘haggling’ because they can commit to things like repeat business.

If the broker is also taking care of the disclosure side of things, again, all parties stand to benefit; the policyholder will never have claim refused on the grounds of non-disclosure, the insurer reduces the level of fraud (albeit sometimes accidental) within their customer base and the broker continues to develop a reputation as a reliable operator.

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