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Well if I’d known that…

Under IA2015, policyholders are under a duty of ‘fair presentation’. Where there has been an innocent failure to give a fair presentation, the insurer’s legal remedy now depends upon answering a hypothetical question – on what terms would the risk have been underwritten (if at all) if the underwriter had been given the relevant facts at the time of placing?

Prove it!

The initial evidential burden is on the insurer, and, at a minimum, it seems likely that the policyholder would be entitled to require the insurer to disclose underwriting guidelines or a rating matrix to support its position.  But in some cases, it might also be necessary for insurers to supply evidence of comparables - other underwriting decisions made in factually similar situations.

Over to you…

In such cases, the only way practically to undermine the insurer's position may be for the policyholder to offer its own evidence of other comparables.  It is unlikely that a single policyholder will hold relevant data of this nature.  Therefore the policyholder is likely to be reliant on the broker to provide this evidence.

As a result, brokers should now anticipate that they will be called upon to assist their clients by providing evidence about what difference, if any, particular facts would have made to underwriting decisions by insurers.

A duty to collect and share data?

The question then is whether this means that the broker is legally obligated to provide this evidence and/or under a duty to take reasonable steps to collect the data in preparation to do so when asked?

The sources of brokers' duties and obligations are typically based on contract (TOBAs), statute/regulation and common law tort.

The last of these is primarily a product of market practice and custom.  There are already well-established market practices requiring brokers to assist policyholders with coverage disputes, particularly at Lloyd’s.  However, before IA2015, the law did not typically require detailed evidence about hypothetical terms of insurance in counter-factual situations.  Therefore there was less need to keep detailed data of this nature.  Given this, it seems unlikely that common market custom and practice is sufficiently developed yet to establish (by itself at least) a potentially onerous legal duty to collect organisational data about underwriting decisions for use in individual cases where an insurer alleges a failure of the duty of fair presentation.  But it may not stay that way forever, and one of the practical consequences of IA2015 over time may well be the development of a new duty of this nature.

Wider trends in the insurance market and beyond will also be a factor.  For example, the concept of ‘Big Data’ highlights that technology has already reached the point where potentially vast quantities of data can be analysed to prove or reveal hidden trends in activities as diverse as peoples’ shopping habits to climate change.  As the technology to interrogate previously overwhelming amounts of information develops and becomes ever more accessible and cost-effective, the more pressure there may be on brokers (of all sizes) to adopt some ‘Big Data’ techniques to assist individual insureds in coverage disputes with their insurers.  The more commonplace this technology becomes, the more courts and regulators will require the broking market to make use of it in furtherance of their customers' interests.

Is the data in a useable format?

Even if brokers already hold information and data about factors tending to influence insurers and premium trends, there may be very significant difficulties in interrogating and converting that information into a useable format for a coverage dispute.  It may be necessary to drill down into a large amount of information and data to demonstrate trends in premium both generally across the market, and for a particular insurer.  It may also be necessary to interrogate risk-specific factors to demonstrate (using identifiable examples) whether or not particular facts made any difference to the terms and premiums imposed by insurers in the past.

This could be an extremely time-consuming task.  The worst case scenario could be that the relevant information is held on numerous individual hard copy placing files, and that someone would have to trawl through each one to build up enough evidence to rebut the evidence provided by the insurer.

Even where the information and data is held in electronic format, the question of how easy it is to interrogate that information will depend on what data about previous placings was captured, and the electronic format in which it is held.  Similarly, where a broking firm has grown over the years by acquiring other firms, the electronic data could potentially be held on a number of different and incompatible systems.  In that situation it could require both forensic IT expertise and broking expertise to export and interrogate all the relevant data.  And broker chains may mean that relevant data is held in other organisations, in which case, the importance of TOBAs to guarantee access and cooperation cannot be understated.

We anticipate that in the short to medium term brokers may have to spend a disproportionate amount of time gathering and analysing information and data held by them in order to assist their clients with coverage disputes under IA2015.  Over time, brokers may well have to invest in their systems to ensure so far as possible that reliable and consistent data is captured in a form that makes it easy to interrogate and generate evidence for coverage disputes

What about data protection?

The General Data Protection Regulation (“GDPR”) comes into effect on 25 May 2018, and will not be affected by Brexit.  GDPR introduces several new principles concerning the use and processing of data, and introduces new obligations that go further than the current Data Protection Act.

Under GDPR, organisations will have to know and understand what “Personal Data” they collect, how it is processed, if it is made accessible without consent and if it is sent to third parties.  They will also need to create or update a data purpose, which states what data is collected, why it is collected, how it is processed, who and where (if outside of the EEA) it is processed, how long it will be retained for, and who to contact in case of a data protection query (your data protection officer).  Organisations will also need to ensure that they have the Data Subject’s consent to use their Personal Data for relevant purposes, and that the consent is properly recorded.  If a lot of personal data is already held but there is no record of the necessary consent, then organisations may need to pro-actively obtain consent.

Given that we anticipate that brokers will need to use data (including potentially “Personal Data”) in the new ways discussed in this article, it may be prudent to factor this into any GDPR preparatory work now.


For further information please contact Joanne Staphnill, Partner on 0 20 7280 8874 or emal joanne.staphnill@dwf.co.uk


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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.