Full Disclosure Guidance

When you complete an application for professional indemnity insurance, you must provide full disclosure of material information. This requirement increases the burden on the person responsible for arranging the insurance cover because material information is defined as 'any information that will influence an underwriter's rating or decision on providing cover'.

Some insurers will offer their terms with a relatively small amount of information about the risk they are being asked to insurer. On the face of it, this seems to benefit the policyholder because it means less form filling and time saving. However, in practise it can create serious non-disclosure problems for the Insured. Just because a shortened proposal form doesn't ask you a particular question, it doesn't mean you don't need to inform the Insurer.

Quite simply, the less information you provide about your firm, the more chance there is of something important not being disclosed, leading to a breach in the policy obligations. This could be a historic claim, new areas of work being conducted, a new subsidiary business, an additional office, an employee disciplinary - the scope is almost endless especially for growing businesses with employees and directors or partners. Unless full disclosure is given at all times, a firm runs the serious risk of a claim not being covered or their policy being cancelled.

The Insurance Act

Full disclosure of material information can be a grey area and the most common cause of disputes between policyholders and their Insurer. That's why the Insurance Act was introduced in 2016. The Act was the culmination of several year’s work by the Law Commission in conjunction with Insurers, Brokers and their Customers. It's designed to reflect the requirements of the modern insurance market and reflects best practice in the UK insurance industry. For more information about the Act you can read our guide here.