The term insurance means the process of being protected from financial loss. It is a managing the risk of uncertain or contingent loss Act (Potter, Hine, Potter,  Nichols, Badger & Knight, 2002). The company that provided insurance is referred to as insurance carrier or insurance company while the person or entity that purchases the insurance is known as a policy holder or insurer(Stempel, Swisher & Knutsen, 2011).

Reinsurance relates to the insurance that is purchased insurance company referred to as ceding company from another insurance company/ companies referred to as reinsurer through a broker to manage a risk. On the other, an insurer is an insurance company who insures the risk from other insurance companies(Patterson, 1934).  The insured typically receives a contract referred to as an insurance policy that gives the details regarding the terms and conditions in which the insured is going to compensate financially. The amount to the insured by the insurer is referred to a premium Act (Potter, Hine, Potter,  Nichols, Badger & Knight, 2002).

Insurance legislative law is a regulatory body of law, jurisprudence and administrative regulation that regulates and governs the industry of insurance and the people involved with the business of insurance (Graves, 1948).The fundamental purpose of the legislative law is protecting the insurance policy holders and customers. The law also focuses on preserving and monitoring the financial solvency of various insurance companies. It the role of the law in the market conduct by controlling inappropriate and unfair trade practices (Landis, 1959). The legislative law regulates the companies of insurance by giving out licenses and by controlling other aspects that would influence the insurance industry(Stempel, Swisher & Knutsen, 2011).

The practice of legislative insurance law entails giving out legal services to insurance participants, counseling in administrative, insurance, transactions, cooperate and regulatory issues such as dissolution, reorganization, restructuring, merger, sale, acquisition, and formation of an insurance company. Additional offers the service of representing the insurance clients before a government agency and a state insurance regulatory agency concerning issues like complaints, resolutions and administrative hearings. In general, the statutory law provides counsel and advice to the insurance clients, managers and directors of an insurance company in respect of the operations of everyday up to the member/shareholder level matters (Brown, Andal,  Zakaib, Donnelly & Bullen, 1999).

The new Act states what constitutes the policy of fair presentation and how the insured and the insurance companies are affected by it. The company owes a contractual duty of not to make misrepresentations and disclose the needed relevant information to the insurer concerning the principle of utmost good faith. The law redefines what it entails to disclose relevant information as any fact that would influence the judgment made by a reasonable, prudent person or an insurer party in determining whether to take the risk or leave(Schoenbaum, 1998).

On 2016 August, the insurance legislation changed. The new insurance act replaced the Insurance Act 2015 which was a legal framework that affected the insurance policy of every business which was now amended on 12th August 2017 (Rejda, 2011).  It changes the foundation in which the insurance policies are usually based. The new Act modernized the insurance law and aimed to make fair and simplify the process of working on a claim with the insurers(Landis, 1959). There before, the insurers could avoid the policy in case of non-disclosed information that is deemed material (Graves, 1948).

The new Act provides remedies by providing legal basis and fair outcomes in claims as a response to a fairly presented risk. In the new Insurance Act, it presents the circumstances to what is deemed as appropriate information founded on the circumstance of one’s business. It sets out that the information given should be clear and concise. It should also be readily available and understandable including highlighted information of any unusual activities that could affect the decision of the underwriter (Patterson, 1934).

According to the Insurance Act 2015, there are significant legislative changes that have a large effect on the insurance arrangements. One of the significant changes is remedies for the fraudulent claims. Previously, in a case of a fraud event, the insurers would avoid the entire contract, and the insured party would easily forfeit the entire complaint (Brown, Andal,  Zakaib, Donnelly & Bullen, 1999). According to part 4 of the Insurance Act 2015, the remedies for the insurers in case of a fraudulent claim forwarded by a policy holder require the following from the insurers.

First, the insurer is not liable to make payments for the fraudulent claim. Second, the insurer may recover any amount of money made to the insured for the fraudulent claim. Third, the insurer may treat the contract as a terminated and retain all the paid premiums in respect of the fraudulent claim. In other circumstances, the paper proposes that an insured party who happens to make a fraudulent claim would be made liable for the payment of the insurer’s legal costs which are incurred during the investigation of the fraud (Graves, 1948).

For instance, a research taken by an association of British Insurers in 2009 found a fraudulent insurance claim was detected in 2008 worth £730 million. The approximated value of the undetected fraud was around £ 1.9 billion in one year. A criminal prosecution involving an insurance fraud is rare, therefore; the cost of providing an efficient and sufficient deterrent is taken care by the civil law (Brown, Andal,  Zakaib, Donnelly & Bullen, 1999). However, there is a huge difference between the manners in which the courts in the United Kingdom handle a fraudulent case and the law as provided in the Marine Insurance Act of 1906.

An insurance fraud is an illegal act committed with the aim of achieving a deceitful benefit from an insurance process. It is when a claimant attempts to obtain an advantage or benefit in a situation where they are not entitled or in a circumstance where the insurer intentionally denies some due benefits(Landis, 1959).Cases of fraudulent in insurance have been there since the beginning of insurance as a profitable enterprise. Fraud in insurance has ranged from slightly exaggerating a claim to intentionally causing damage or accidents. According to the Coalition made against of a fraudulent claim is insurance fraud, the cause is typically centered on greed (Appleman & Holmes, 2016).

For instance, a case of drug dealers involved in insurance fraud thinks that it is profitable and safe than working on a corner street. Court sentences on insurance fraud cases are more lenient as compared to other committed crimes. In most cases, settling a fraud offense is much comfortable than following a legal action(Brown, Andal,  Zakaib, Donnelly & Bullen, 1999). In other situations, a fraud event occurs when the amount insured is higher than the original actual value of the insured property. The situations provide an opportunity to the fraudsters to make profits through destroying the insured property since the amount they receive is much greater than the actual value of the property.

Another significant change in the legislation regarding underwriting policy is on disclosure and misrepresentation. The new act replaced the previous duty of disclosure added a requirement on the insured that they must first make a fair presentation of the risk. Therefore, the insurer cannot avoid the insurance contract due to the breach of the principle of utmost good faith. The policyholders will be required to disclose relevant information that is material. The insurer can additionally ask any necessary questions concerning the presentation of the risk. The fair representation of the risk requires the insured party to make their disclosure in a way that would be reasonably accessible and transparent to the insurer (Appleman & Holmes, 2016). The objective is to ensure that the insurer is bombarded with vast information without being assessed whether it is relevant and valid. The insured party ought to give out information that could be held by an agent or a broker.

The rule of disclosure and misrepresentation entails a situation where a policyholder fails to give out all the information they should have when taking the insurance policy. In most cases, the insured is said to have given out inaccurate or incorrect information thus the term misrepresentation(Brown, Andal,  Zakaib, Donnelly & Bullen, 1999).The consumer insurance Act 2012 on the part of disclosure and representations states that the insured hold the obligation of taking reasonable care in giving out the information to the insurance company that is deemed as misrepresented. In case it is found that information was falsified and had an effect on the policy, the response by the insurer depends on whether the disclosure and the misrepresentation were careless and deliberates (Friedmann, 1949).

In insurance, the insurers need as much information as possible to assess the risk on the table. Therefore, the insurer is required to answer broad questions about the risk to fully assess the risk. The questions ought to be accurately answered. Since there various factors affecting a risk, where less of knowledge about a possible risk is known to the insurer, the insured has an obligation to disclose any fact deemed material (Ayres & Ayres, 2012). Most customers don’t appreciate the fact that they hold the responsibility of providing information that is out of the question that is subject to a possible risk (Brown, Andal,  Zakaib, Donnelly & Bullen, 1999). The information they need to disclose mostly involve a medical condition, their lifestyle or occupation or any other information relevant in assessing the risk. In this context, there is no difference between failing to answer and giving a false answer (Schoenbaum, 1998).  In this case, failing to answer is referred to as a non-disclosure while giving an incorrect answer is known as a misrepresentation (Jerry & Richmond, 2012).

The effect of misrepresentation and disclosure is that there would be no existing contract between the policyholder and the insurer if all the material facts were given (Appleman & Holmes, 2016). In such a circumstance, it took to be a causal misrepresentation. In a less severe case, the insurer might have agreed to enter into a relationship but on very different terms than before. In this case, it is referred to as incidental misrepresentations (Graves, 1948).

Non-disclosed information is told to be material it seems to affect the assessment of the risk, then, it is actionable(Ayres & Ayres, 2012). It is the underwriter holds the responsibility of assessing the risk. If a reasonable, prudent person does not find the information material, then it is not actionable. A reasonable, prudent person is neither the actual underwriter nor the original applicant, but a hypothetical person who stands in the shoes of the insurance proposed and had the knowledge of the situation and the factors that the underwriter should take into account while assessing the risk. However, the duty of disclosure is displaced in situations where there were no questions asked, and there is no underwriting (Friedmann, 1949).

The usual remedy for disclosure or a misrepresentation is the rescission. Rescission is not only used when the insured is involved in a fraudulent circumstance but also when there is a disclosure and a misrepresentation is innocently or negligibly made. Either a fraudulent situation or a disclosure case, they give rise to claiming for damages (Brown, Andal,  Zakaib, Donnelly & Bullen, 1999). However, rescission of a contract happens in situations where the insured would not have agreed to enter into a contract at all if the insured had given the relevant information. In cases where the insurer would have decided to have a contract with insured but on different terms, a different appropriate remedy is provided that address the detrimental effects of the misrepresentation.

An example of a disclosure and misrepresented case is that of Sherwin Jerrier vs. Outsurance. A high court case in 2013 was deemed as a nondisclosure issue of insurance. In this case, the defendant and the insurer rejected a claim that was based on the insured’s/plaintiff failed to disclose about having been involved in two motor vehicle accidents during the time of taking up the contract. For the court to decide whether to or not to repudiate the contract, it was necessary first to determine a reasonably prudent person would have taken the two unreported cases to have affected the contract (Rose, 2013).

There is also another legislation change on underwriting policy under warranty. An insurance warranty refers to the policy made to the insurer by the policy holder. If it is broken, it follows harsh on the policy holder (Stempel, Swisher & Knutsen, 2011). The principle set principles about the warranty is based on Lord Mansfield rulings during the eighteenth century in the 1906 Act. According to the new Act, there will be limited, and the effects of the breach of warranty will be lessened (Brown, Andal,  Zakaib, Donnelly & Bullen, 1999).Therefore, it will be hard to make them since the proposal clauses which are used in turning an insurer’s representations to a guarantee will not affect anymore. One will need to revise the wordings and the proposal forms first. The warranty will be limited in scope since the breaches of warranty that is regarded to be irrelevant to the loss will not discharge the insurers from the fallen liability which is one of the key issues all the insured share with the existing law(Ayres & Ayres, 2012).

Conversely, the new Act does not redefine if a term is a warranty or not since under the old Act a warranty remains to be a warranty also in the new Act (Potter, Hine, Potter,  Nichols, Badger & Knight, 2002).The only change that has occurred is the substantive legal effect to the term referred to as a warranty. Under the former Act, if there was a case of breach of warranty, it used to discharge the insurer’s liability immediately and permanently. But in the new Act, it is merely even postponed until the breach of warranty is remedied if possible (Clarke, 1997). There are new exemptions introduced by the new Act are similar to those exemptions that existed there before. Where the insured remedy his/her breach of warranty, just before an occurrence of any loss, then compliance with the warranty is considered unlawful (Brown, Andal,  Zakaib, Donnelly & Bullen, 1999).

For instance, in case a ship that was destroyed while being sailed for a war zone.  It was a breach of a contract, following that the ship sailed out of the war zone which is a breach of a contract, a then sinks, then apparently the violation of the warranty was remedied just before the loss, the insurer party is still not liable for any loss(Soyer, 2001).The insurer is free from the liabilities since the loss is said to be attributable to something happening and in this case, it after the warranty was breached.

The Act under section 10, explains the meaning of a breach of warranty being remedied. The first category is time warranty which refers to as an assurance that by a particular time, a condition will not be fulfilled, something will not be done, and something may be the cause or not. If this category of warranty is breached, then the risk that was related to it, is treated as the same risk that was initially predicted by the parties (Cartwright, 2012).

In a case where the insured party breaches the warranty repeatedly, though at the time of loss the warranty was not breached, then the insurer is not liable Act (Potter, Hine, Potter,  Nichols, Badger & Knight, 2002). For example, a warranty that provides that a motor vehicle is only to serve for private use only, but the insured goes ahead and breaches the contract by using this motor vehicle for commercial purposes probably on weekends; the Law Commission provides that the insured cannot be protected by that act (Brown, Andal,  Zakaib, Donnelly & Bullen, 1999). It is considered that the Act would only be remedied if the insured party had ceased completely to have used the car for commercial services or rather; the rate of personal usage had increasingly superseded the commercial services.

Ostensibly, it may not be possible to remedy a breach of warranty Act (Potter, Hine, Potter,  Nichols, Badger & Knight, 2002). For instance, in a case of policy in the issue of fine wine where the insured has warranted that the bottles will at all-time be stored in a cool cellar. Then during the shipment, the bottles are exposed in a hot warehouse instead of on a cool cellar hence causes unavoidable deterioration on the corks of the bottle(Friedmann, 1949).  Then later on the bottles are moved to a cool cellar, the insurer may be out of the liabilities for two reasons.

First, it could be argued by the insurer party that the breach of warranty by the insured party has not been remedied yet. It is because, the risk relating to the warranty, stating that there is a possible risk of the wine getting damaged by the harsh climatic condition cannot and has not been related as same with the risk that was originally contemplated. On another argument, if the wine was destroyed by oxidation process after being moved to a cool cellar, then the risk is said to be attributable to something happening since it was before the breach of warranty was remedied Act (Potter, Hine, Potter,  Nichols, Badger & Knight, 2002).The wine got oxidized as a result of being exposed earlier to a hot climatic condition earlier. In either of the two arguments, the insurer party is deemed free from any liability for the insured’s action for breach of warranty.

Consequently, the Law of Commission has provided that the new Act of insurance do not anticipate to inhibit the insurer party to include the conditions necessary to the insured party to explain the circumstances in which the insured will not be liable for the liabilities of the insured in case of breach of warranty. Therefore the insured is let known of the consequences of breaching the warranty (Lowry, 2009).

As a recommendation, I would recommend the insurers to communicate with the customers the changes that occur concerning insurance. Effective communication is essential for the insured party and the clients. The insurer party should ensure that the customer is aware of any every legislative change concerning the Insurance Act (Brown, Andal,  Zakaib, Donnelly & Bullen, 1999). The customer may be reluctant to embrace the legislation changes hence hesitate to request for a contract without knowing of the new terms and conditions and the possible consequences.

On the other hand, the customers should always be in check with any legislation changes made especially those with an ongoing contract with the insurance company. In most times, if the loss is on the insured, the insurer may not confide all the relevant information to the customer so as not to lose the client. Consequently, the insurer may fail to disclose the information until when it is necessary which might highly affect the insured party unexpectedly (Soyer, 2001).

The client also ought to disclose all the required information to the insured before starting a contract with the insurance company. As it is required in the principles of insurance, the insured party is required to make the insurer party aware of any other relevant knowledge that can influence the calculation of the premiums or the decision of the insurer to commit to the contract on the same terms(Stempel, Swisher & Knutsen, 2011). The customers should be aware that in a case of any misrepresentation or a nondisclosure, the insurer is not liable for any possible loss. Therefore, to avoid unexpected loss, the insured should let it be known of any sensitive information and should not falsify anything Act (Potter, Hine, Potter,  Nichols, Badger & Knight, 2002).

Furthermore, the insured should always ensure not to breach the contract in any way. For instance, if a policy was indicated that a motor vehicle was meant for personal use services, the insured party should not consider using the motor vehicle for commercial services. From the above, it is clear that not all breach of warranty is remedied (Birds & Hird, 1996). Though there are exemptions cases where the breach of warranty has resulted in favoring the insured when it is only remedied, it is not always easy to for an insured to get away with the consequences of breaching a warranty. Therefore, it is only appropriate to act as per the contract and avoid the breach of warranty.

The insurance managers should ensure they take control of letting the customers understand the importance of fair presentation. There appears to be that there is a lot of information and knowledge for the new Act. In the absence of proper details to the insured on how the new policy will take effect, there may be a possibility of a misconception and misunderstanding among the insured parties (Brown, Andal,  Zakaib, Donnelly & Bullen, 1999).

The insured party should always present the virtue of honest not just when providing the relevant, needed facts to the insured during the start of the contract, but also in case the insured party receives a higher amount of compensation than the original state Act (Potter, Hine, Potter,  Nichols, Badger & Knight, 2002). In most cases, the insured takes the benefits with greed and at times, can even destroy the property intentionally. The principle of indemnity in insurance provides that the customers are only supposed to be compensated through regaining him/her to the original state. The insured party should not make the profit from the compensation provide after the accidental loss.

Insurance Law