Getting Close to the Client's Knowledge
There is a danger of dealing with too large a chunk of the Act at one time. What we want to do with these bulletins is focus on one key learning point at a time. The Act has a section on the knowledge of the insured and it is one aspect of that we wish to deal with today. There are actions that you may consider taking once you have read it.
Here is what the Act says:
An insured who is an individual knows only—
(a) what is known to the individual, and
(b) what is known to one or more of the individuals who are responsible for the insured’s insurance.
An insured who is not an individual knows only what is known to one or more of the individuals who are—
(a) part of the insured’s senior management, or
(b) responsible for the insured’s insurance.
In addition, the Act changes significantly what an insured ought to know for the purposes of disclosure. Whether it is an individual or not, an insured “ought to know what should reasonably have been revealed by a reasonable search of information available to the insured.
Thus there are two key tasks you need to undertake.
The first is to identify what questions you need to ask (the fact find in its widest sense) and who at the client is most likely to be able to give an accurate answer
The second is to advise the insured on what is likely to constitute a reasonable search in the context of the insured’s business and the nature of the covers required.
In this regard, we feel that one of the best things you could do is to collaborate with the insurers you trust. By doing this you can build a template that helps you identify the ideal person at the client who can provide specific answers for specific questions on the fact find.
Person responsible for the insurance: This should give you access to many answers.
Senior Management: You may well have to speak to directors or partners for up to date information on convictions, censure or financial history. You may need to speak to the firm’s accountant or directors for information on future plans. In some clients (family companies) the controlling influence might be the majority shareholders rather than the directors, which is itself a material fact.
It may well be appropriate to ask questions of staff managers and process and production managers.
1. Insurers will want to know about the past, present and future.
2. They will not only want to know about hard events (claims) but also soft
events (incidents)
3. They will often want information material to a range of classes of insurance
So, have your key questions in mind and develop templates of the sort of people at your clients who will have the answers: past, present and future.
Advising the Client
It never hurts to give the client the terms of the Act but in reality you need to explain things in a way that clients understand so they can make an informed decision.
Try to make sure you discuss the matter with them and identify a list of people you want to talk to and ask the client to agree this list. What is the point of turning up to speak to a list of four people when only three attend? What is the risk to the client if you never speak to a board member or you are not allowed access to the production line manager or the Health and Safety Officer?
We are endorsing the idea that the agreed list becomes part of the TOBA/client agreement and a failure of the client to allow you access to these people might invoke some sort of disclaimer of liability in your firm’s favour. This is an “early days” idea but the gist of it seems sound.
The reason for many reduced claims is the failure of the insured to disclose material information that was not available to the insurance manager (up to date financial history, future business projections, health and safety incidents and so on).
You have about 6 months to go, so our first ‘to do’ task this week is to talk to insurers that you do business with regularly and ask them for their experience of what is likely to go wrong in any given trade and ask them who at the insured might be the right person to speak to. Loss adjusters in particular will have a good idea
Secondly, set up a team (perhaps just you!) to consider what you are going to tell clients about their new obligations under the Act.
Consider whether to add a clause to your TOBA which identifies specific people at the client that you want to talk to or communicate with each year. This may be most appropriate for larger ‘visit’ cases. If the client will not let you see the agreed individuals then you at least have a ready made response when potentially material matters known only to those individuals are overlooked.
