ACE to stop using basis of contract clauses

ACE European Group (AEG) will no longer include basis of contract clauses in new and renewed business, with the exception of marine policies that operate under the Marine Insurance Act.

AEG said that it was acting on feedback from brokers and clients and acting to allay concerns about policies being invalidated by incorrect information that was provided in good faith.

ACE regional president UK and Ireland David Robinson said: “ACE invests a great deal of time in working with brokers to understand clients’ individual needs and we have seen a steady rise in requests for the removal of basis clauses, which we have been happy to accommodate.

“The next logical step was to stop applying basis of contract clauses for any new or renewing policies going forward. This is an important initiative for us and one that is a direct result of feedback from our customers.”

Airmic, the association for risk managers and insurance buyers, recently branded the clauses as “unfair and unnecessary” and has urged insurers to stop using them. The association created a guide and model wording to negate any use of a basis of contract clause in an agreement.

“Our new model wording is a big step forward for any commercial buyer wanting protection against the possibility of an insurer avoiding a claim on purely technical grounds,” said Airmic chief executive John Hurrell. “Basis clauses are currently prevalent in the market, and we think they are unfair, unnecessary and not as well understood as they should be.”

Basis of contract clauses state that policies are invalidated if any incorrect information is provided by the insured, regardless of the materiality of the inaccuracy or the error being unintentional.