The new Insurance Act coming into force on the 12th August 2016 will impact all employee benefit insurance policies including life assurance, medical insurance and income protection.
However, what are the main changes being introduced by this act and what does this mean to employers and advisers? One of the key changes to the Act is that it allows insurers a broader range of options and resolutions, if they are not given full, accurate data about an insurance risk. Prior to this act, the only way an insurer could legally address a case where incorrect data was provided that materially altered the risk was to cancel the policy, refund premiums and ask the employer to refund all claims paid. Now insurers will be able to consider a wider range of options if there is non-disclosure rather than only the blunt tool of cancelling a policy.
This Act clarifies the need for employers and their advisers to make a fair presentation of the risk and fully disclose all material facts when setting up policies and sending employee data. Data is the biggest risk to employers when organising policies. In recent years we have seen employers make data ‘errors’ that will be even more significant when insurers are given a wider range of powers. These are the most common data ‘errors’ we see:
Long Term Absentees – Life Insurers must always be advised of employees who are ‘long term absent’ when quoting. Get this wrong and the claim potentially will not be paid. Income Protection Claims – Insurers must be told of any possible Income Protection claim within an agreed timescale. Missing this deadline can lead to a claim being declined. Salary Data – For Income Protection and Life Assurance claims insurers need correct salaries disclosed. Mistakes can include showing reduced salaries for staff on maternity pay or sick leave so a claim is not fully paid.
High Earners – When a new senior employee joins a Life Assurance or Income Protection policy and needs medical underwriting insurers must be told immediately so they can start the underwriting process. Delays in informing insurers will mean full cover is not in place for the most senior staff. At Punter Southall Health & Protection we expect employers will demand that their advisers manage their data securely and accurately and the selection of an adviser will be linked to how employee data is managed and processes for managing data risks.
John Dean Managing Director at Punter Southall Health & Protection commented, “Managing employee data confidentially and providing all disclosures to insurers is even more important with the new Insurance Act. We expect more employers to use Online Portals such as our ‘Gladis’ platform to securely upload data monthly. Not only does this help with budgeting and accounts, but it reduces risk of insurers declining claims. Data is the biggest risk for employers and the new Insurance Act reinforces need for better data provision”.