TRADE CREDIT INSURANCE continued from page 37 > The share of premium re micro SMEs (
continued from page 38 > in 2012; at the same time the top regional brokers representing customers in our commercial portfolio have increased from 27 percent to around 40 percent over the same period.” COLLECTIVE RESPONSIBILITY All of the major insurers support the broker channel with training, Atradius included: “Across the industry there is a collective responsibility to raise the bar in terms of awareness and ‘education’ about the real benefits available from/through credit insurance and bodies such as the ABI are working with carriers to develop a more robust marketing strategy,” he adds. Sue Morley also sees the broker channel as being critically important: “The broker channel is vital,” she says, “certainly to our business model which is solely brokered business. A credit insurance policy is not an off-the-shelf product and works best where it is tailored to that particular business. The brokers offer a valuable and necessary service in determining the type of cover required and accessing the credit insurance market place to find the most appropriate policy for price, structure and most important, credit limit coverage.” Andy Moylan agrees: “Brokers have a duty to ensure that with their help clients are complying with the terms and conditions of their policy and that they are deriving maximum advantage from it,” he says. So what of the new challenges that the industry faces, and in particular the new Insurance Act, described as the most significant reform of insurance law in England and Wales for over 100 years? How fair are the new rules regarding the Duty of Fair Presentation and other important areas such as the new remedies for nondisclosure and warranties? UNKNOWN QUANTITY In Frederic’s view, they are not only very fair but also help to remove much of the ‘unknown’: “They will help to manage our clients’ expectations in respect of a client duty to present all that they reasonably can of any risks the insurer should know about,” he says. “It should not be exhaustive and the Act provides guidance on what is a ‘fair and reasonable’ approach. “As an insurer, there is more onus for us to prove that the client acted deliberately or recklessly in not either providing the full facts at the outset of the policy or alerting the insurer when a risk presented itself. The insurer must make a judgement on whether we would have acted differently had we been presented with the necessary information at the outset. Fortunately, such cases are extremely rare, so therefore the day to day impact should be minimal.” In respect of remedies on breach of warranty, Frederic also has an opinion: “Previously, breach of warranty in an insurance contract discharged us from our obligation to provide an indemnity from the moment of breach, even if the breach was subsequently remedied. Breaches of warranty will now serve only to suspend our liability until the breach is remedied. Therefore, we are liable for valid claims which arise after the breach has been remedied, this is a fundamental change but again, these instances are rare at Coface so we see no material change day to day.” Euler Hermes too believes that clients will benefit from the legal changes the Act provides: “For credit insurance, the new Duty of Fair Presentation balances the requirement for the insured to outline the business The brokers offer a valuable and necessary service in determining the type of cover required and accessing the credit insurance market place to find the most appropriate policy for price, structure and most important, credit limit coverage. they are looking to insure in a clear and accessible manner, with the need for the insurer to ask the appropriate questions,” Valerio says. “We have always sought to clarify the risks involved before underwriting each policy so this won’t have material impact on our practices.” Atradius has confirmed that its policies will be governed by and interpreted in accordance with the Act: “Accordingly the Act will apply to all insured risks and Atradius does not nor will not seek an opt out of its provisions, which under the Act it could do,” Marc explains. SIGNIFICANT MILESTONE “Whilst it is acknowledged that the Act is a significant milestone for the industry, we do not anticipate any significant impact for Atradius’ customers. In our view the Act in many ways formalises ‘best practice’ standards within the industry that we had already adopted or been working towards and so we do not anticipate a material impact to our business operations. As part of our strategy of continuous improvement we had already made adaptations to our proposal procedures/ forms and incorporated additional opportunities for customers to update ‘anything that’s changed’ into our working practices; these changes align fully with the requirements of the Act.” Nexus CIFS has similarly confirmed that it has chosen not to opt out of the new Act and has amended its policy wordings to be compliant. But Sue Morley says that it is still early days, and the new wording has not yet been put to the test: “It will probably be several years before the effect is fully seen and precedent has been established by the courts,” she explains. “However the intention is to make an insurance contract more transparent for both policyholder and underwriter and in some cases make it fairer to the Insured, particularly with the late payment provisions being introduced next year that allow the Insured to claim damages for the late payment of a claim. If this helps to enhance insurers’ reputation for fairness and paying claims and increase take up of the product that will be a very positive outcome.” The recognised standard www.cicm.com <strong>October</strong> <strong>2016</strong> 39