Contract Certainty

The insurance industry is often called upon at very short notice to provide protection for business customers wishing to transfer risk. Insurers and insurance brokers have a history of rising to the challenge by quickly providing protection, often with limited information. In most situations this works very well and the insurance industry provides customers with clear protection and peace of mind.

However, there may be uncertainty, either by the customer as to exactly what level of protection was provided and for the insurer not knowing exactly what it is they are insuring.

Uncertainty may lead to disputes over what was agreed when the protection started. This may be very important if a customer needs to make a claim against the insurance contract and the terms of the contract are uncertain.

To help avoid disputes from uncertainty, the insurance industry has produced a code of good practice to help provide contract certainty before protection starts. The code is not compulsory, as that may breach competition law. However most of the insurance industry has agreed to abide by the code from October 2005. The code also has service standards for issuing insurance documents in a reasonable time.

The code does not stop the insurance industry from reacting quickly to the urgent needs of customers for protection. The code sees to it that there is a form of contract agreed when protection starts. There may be a need to agree changes to the exact terms of the contract when both parties have full knowledge. However, “terms to be agreed” or similar references should not be used.

So does this affect my business? Most business customers do not need unusual contract terms to meet their needs.

Code supporting guidance may be read or downloaded from the column on the right of this page.