Insurance disputes are as much a fact of life as the UK’s rainy days — and while going to court isn’t the most fun thing to do, it’s best that firms are prepared for any possible legal probe, with underwriting platforms, in particular, having their work cut out for them as poor design could prove disastrous.
“The risk is that platforms that are too linear and too rigid in their processing can weaken the underwriter’s case in the event that a policy is avoided,” warned Clyde & Co senior associate Dominic How (pictured). “The Insurance Act’s insistence on proportionate remedies in the event of misrepresentation makes the need for clear evidence of the underwriting process more important when the insurer seeks to validate their proposed remedy.”
How said the manner in which an underwriting platform collects information and responds to it can become a matter of intense consideration in a dispute – thus the importance of reviewing the way platforms operate.
Things to pay close attention to include the wording of questions in the proposal and statement of facts; declarations reminding policyholders of their duty to give a fair presentation of the risk; and triggers that refer the risk to a human underwriter for review if certain responses are submitted.
“As more and more underwriting is conducted via online platforms, the way in which these systems behave will increasingly come under the courts’ scrutiny,” noted How. “Because of this, it’s vital that the processes and language of these systems are both understandable to a judge and are robust enough to hold up under legal examination.”
For instance, if drop-down menus for predefined options are used, How recommends incorporating a free text box to avoid inaccuracies in case none of the provided options apply.
“When designing these platforms, insurers need to think carefully about how they might be interpreted in legal actions,” said How.