The duty of fair presentation is the main pre-contract disclosure duty for non-consumer insurance under the Insurance Act 2015. Before entering a commercial insurance contract, the insured must make a fair presentation of the risk to the insurer. The duty also applies to relevant variations and is normally engaged again at renewal because a new contract is being entered into.
This page explains the general statutory structure. It does not decide whether a fact is material, whether a breach occurred or what remedy applies to a particular claim.
For the wider management process, see Business Risk Management and Insurance.
Quick answer
A fair presentation must:
- disclose every material circumstance the insured knows or ought to know; or, failing that,
- disclose enough information to put a prudent insurer on notice that it needs to make further enquiries;
- present the information in a manner that is reasonably clear and accessible;
- make every material representation of fact substantially correct;
- make every material representation of expectation or belief in good faith.
The business should carry out a reasonable search of information available to it, coordinate relevant people and keep records of what was checked and supplied.
Who does the duty apply to?
The Insurance Act 2015 distinguishes non-consumer and consumer insurance. A business buying insurance for business purposes will usually fall within the non-consumer regime, although legal classification depends on the circumstances.
For consumer insurance, the Consumer Insurance (Disclosure and Representations) Act 2012 uses a different duty based on taking reasonable care not to make a misrepresentation. This page focuses on non-consumer business insurance.
When does the duty apply?
Section 3 of the Insurance Act states that the duty applies before a contract of insurance is entered into. It also applies before a variation, with statutory rules adapting the duty and remedies to variations.
In practice, businesses should prepare for:
- new policies;
- annual renewals;
- mid-term variations;
- additions of entities, activities or locations;
- material changes where the policy requires notification.
A policy may also impose continuing notification duties during the policy period. Those contractual duties should be read separately.
What is a material circumstance?
Section 7 provides that a circumstance or representation is material if it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms.
Materiality is therefore not limited to facts that definitely cause a claim. It can affect whether the insurer offers cover, the premium, excess, exclusions, conditions, limit or information it requests.
Possible examples, depending on the business and policy, include:
- the exact activities and services;
- claims, incidents and known circumstances;
- financial distress or insolvency history;
- work in high-risk sectors or territories;
- use of heat, height, hazardous substances or specialist machinery;
- contract values and unusual liabilities;
- security, backup or quality controls;
- unoccupied premises;
- previous cancellations or special terms;
- significant changes before inception.
The fact that an insurer did not ask a specific question does not necessarily make a circumstance immaterial.
What the insured knows
Sections 4 and 5 contain detailed knowledge rules for insureds and individuals. For an organisation, actual knowledge includes what is known by individuals who are part of senior management or responsible for the insured’s insurance.
The Act also attributes what the insured ought to know. This includes information that should reasonably have been revealed by a reasonable search of information available to the insured.
A reasonable search is context-dependent. A small firm may have fewer people and records than a large group, but it should still identify where relevant information is held.
Who should be asked?
Depending on the risk, a search may involve:
- directors or partners;
- the person arranging insurance;
- finance and payroll;
- HR and health and safety;
- operations and site managers;
- IT and cyber-security personnel;
- quality, compliance and legal teams;
- project managers and client leads;
- claims handlers;
- subsidiaries or insured entities;
- external advisers holding relevant information.
The business should define the scope, record responses and escalate inconsistencies.
Clear and accessible presentation
Section 3 requires disclosure in a manner reasonably clear and accessible to a prudent insurer. The purpose is to prevent material information being obscured within an unstructured volume of data.
A practical presentation may include:
- an executive summary of material facts;
- a structured activity and exposure description;
- claims and circumstance tables;
- current and projected financial figures with definitions;
- explanations of unusual changes;
- copies of supporting valuations or controls;
- a list of assumptions and unresolved questions.
Supporting documents should be labelled and cross-referenced. Do not rely on the insurer finding one material sentence in a large attachment.
Accuracy of representations
A material representation of fact must be substantially correct. A material representation of expectation or belief must be made in good faith.
Distinguish confirmed historic data from forecasts. Turnover projections, payroll estimates and expected contract values should be based on a reasonable method and labelled as estimates.
If an answer changes between application and inception, tell the insurer where required and retain confirmation.
What need not be disclosed?
Section 3 includes circumstances that do not need to be disclosed unless the insurer asks, including matters that diminish the risk, that the insurer knows or ought to know, or about which the insurer waives information. The statutory wording and facts control the exception.
Businesses should be cautious about assuming an insurer already knows a fact. Record the basis of any waiver or reliance on insurer knowledge.
Role of questions and brokers
Insurer questions help identify information it considers relevant, but clear answers do not necessarily exhaust the duty. If a question is ambiguous, ask for clarification rather than selecting the most convenient interpretation.
A broker can help structure the presentation, but information errors by an agent may still affect the insured. The business should review the final submission and keep a copy of what was sent.
The Business Insurance Documents guide explains why the proposal, statement of fact, schedule and wording should be checked together.
Qualifying breach and inducement
Under section 8, an insurer has a remedy for breach only if the breach is a qualifying breach. Broadly, the insurer must show that, but for the breach, it would not have entered into the contract at all or would have done so only on different terms.
This makes underwriting evidence important. A difference in the information is not enough by itself; the statutory test concerns what the insurer would have done.
Deliberate or reckless breach
Schedule 1 provides the strongest remedy where a qualifying breach is deliberate or reckless. The insurer may avoid the contract, refuse all claims and need not return the premium.
The insurer bears the burden of showing that the breach was deliberate or reckless under the statutory test.
Other qualifying breaches
Where the qualifying breach was neither deliberate nor reckless, the remedy depends on the insurer’s hypothetical response to a fair presentation.
Insurer would not have contracted
The insurer may avoid the contract and refuse claims, but must generally return the premium.
Insurer would have imposed different non-premium terms
The contract may be treated as if those terms applied from the outset. This could affect exclusions, conditions or limits, depending on the evidence.
Insurer would have charged a higher premium
The insurer may reduce the amount paid on a claim proportionately using the statutory premium formula.
These remedies differ from a policy average clause. Read What Underinsurance Means for a Business for that distinction.
Variations
Schedule 1 contains separate provisions for breaches relating to a variation. The remedy can affect losses attributable to the variation and depends on whether the breach was deliberate or reckless and what the insurer would have done.
Do not assume that a mid-term change is administratively minor. Provide a clear description and obtain the endorsement.
Contracting out
For non-consumer insurance, parties can in some circumstances contract out of parts of the Insurance Act, subject to transparency requirements. A disadvantageous term must be sufficiently drawn to the insured’s attention before the contract and be clear and unambiguous as to its effect.
Review any clause stating that the policy disapplies or modifies the Act. Material questions may require specialist advice.
Practical fair-presentation process
1. Define scope
List the policies, entities, activities, locations and period covered by the exercise.
2. Identify information owners
Assign named contacts for finance, people, operations, contracts, property, technology and claims.
3. Conduct and document the search
Ask structured questions, set a response date and retain evidence. Record where information was unavailable or estimated.
4. Test materiality
Consider what could influence a prudent insurer’s decision. Escalate uncertainty rather than silently omitting a fact.
5. Present clearly
Summarise material facts, explain changes and organise attachments. Avoid unexplained abbreviations and raw data dumps.
6. Validate
Have responsible management review the presentation against current operations and records.
7. Update before inception
Confirm whether anything changed after submission. Notify the insurer as required.
8. Check issued documents
Compare the final schedule and endorsements with the agreed presentation. Raise errors promptly.
Examples
New service omitted
A consultancy adds a technical design service but renews using the old description. The new activity could influence the insurer’s judgement. The business should disclose it clearly, including income and contract exposure.
Claims data held by another team
The person arranging insurance reports no claims because finance has no payment record. Operations holds several incident reports and a client allegation. A reasonable search should be designed to find relevant information outside finance.
Unstructured document upload
A business uploads hundreds of files without identifying a serious fire-protection defect mentioned in one report. The clear-and-accessible requirement means volume alone is not a safe disclosure method.
Forecast stated as fact
A start-up gives projected turnover without explaining that it is a forecast. The presentation should identify the basis, assumptions and period.
These are simplified examples and do not determine legal outcomes.
Records to keep
Retain:
- the questions asked internally;
- names and roles of respondents;
- information supplied;
- claims and circumstance searches;
- valuation and financial sources;
- the final presentation and attachments;
- insurer questions and answers;
- broker correspondence;
- management approval;
- issued schedule and endorsements;
- later updates before inception.
Use the Business Insurance Review Checklist as a control record.
Common misunderstandings
- “The insurer did not ask” is not always a complete answer.
- “The broker knows” is not evidence that the insurer received a clear presentation.
- “It was in the attachment” may not satisfy clear and accessible presentation.
- “No claim was paid” does not mean an incident or circumstance is irrelevant.
- “The same answer was accepted last year” does not make it current.
- “The error was accidental” does not mean there can be no remedy.
- “The policy was cheap” does not establish that the insurer would have charged only a little more.
The Common Small-Business Insurance Mistakes guide covers related operational failures.
Limitations
Materiality, knowledge, reasonable search, inducement and remedy are legal and factual questions. Policy wording can modify the statutory position in business insurance where contracting-out requirements are met. This page is general information, not legal advice.
Read the Insurance Information Disclaimer and obtain appropriate professional advice for a disputed disclosure or material placement.
Next step
Before the next application or renewal, use When Businesses Should Review Their Insurance to identify changes, then document the reasonable search and final presentation.