Briefing: Duty of disclosure headache must be simplified to battle misunderstandings

As a commercial insurance broker, there is a finite amount of time where you have your clients’ interest and attention. This time must be used wisely, prioritising the information that matters the most.

Regardless of the size of a client’s business, none of them wake up with a spring in their step to sort out their insurance programme for the next year. They have one eye skimming the insurance documentation and the other on their inbox pinging with emails, diverting their attention and time.

Among the topics that struggle to compete for clients’ attention, one clearly stands out for me. Although deemed to not be as exciting as a premium saving or the removal of a condition precedent, this factor is fundamental to the validity of every policy – the duty of disclosure.

This section, often tucked away in a policy’s statement of fact section, is a source of misunderstanding and can easily be overlooked.

With a wide question set that would not look out of place during an icebreaker game of ‘Have you ever?’, the duty of disclosure requires potential policyholders to detail any material facts prior to policy inception that could influence an insurer’s decision to accept a risk or set a premium price.

This means that each business, partnership or board of directors has to recall a time in their business career where they may have:

• Had insurance declined, cancelled or refused.
• Been involved in a business which has gone into liquidation – voluntary or compulsory – receivership, administration or bankruptcy.
• Had any County Court judgments or tax recovery actions against themselves personally or against the company.
• Been convicted of any criminal offence which is not spent.

Granted, most policyholders would remember if they had been convicted of a criminal offence – but something as simple as a personal insurance policy being cancelled because a credit card expired may not immediately spring to mind when filling in duty of disclosure paperwork for a commercial programme.

I also understand why company directors insuring, for example, a property ownership business under the name of one legal entity may not think that they need to disclose information of a retail business they were involved in that was insured under a completely separate legal entity and went into liquidation during 2020’s Covid-19 pandemic.

Empathy from brokers is crucial when sensitive disclosure situations arise.

For many commercial clients, a patchy professional history can be viewed as a personal failure or a difficult time they would rather forget – preferably with as little discussion as possible.

The broker’s role, therefore, is to be sensitive enough to allow the client to open up, but also be sufficiently curious to gather enough information that is going to satisfy insurers.

Nuanced challenges

The duty of disclosure challenge is greater still for charities, unincorporated societies, Community Interest Companies (CICs) and other third sector organisations.

Not only do they face the ongoing difficulty of recruiting trustees, but those trustees and officers also fall within the scope of the duty of disclosure, often without realising it.

The other hurdle that commercial clients face is that their accountant may recommend liquidation as a route for closing a company, using either a creditors’ voluntary liquidation (CVL) pathway if the business is insolvent, or a members’ voluntary liquidation (MVL) process if the firm is still solvent.

When making that decision, the accountant is reviewing the viability of only that business and not necessarily taking into consideration future implications of such liquidation – such as the arrangement of insurance for future incorporated businesses.

A lack of consistency is also a source of broker frustration, in my experience, as each insurer has different requirements and expectations around the duty of disclosure.

Some are happy to limit disclosure to events in the past five years, while others look for disclosure covering an indefinite amount of time.

Brokers as a protector

Trade body Biba’s Industry Claims Working Group, in collaboration with its Insurance Brokers Standards Committee and consultancy Flaxmans, has published guidance called A Clear Approach to Disclosure, which was released in May 2025.

This formed part of Biba’s overarching plan to appeal to insurers to simplify their requirements towards the duty of disclosure.

The consequences of a business not complying with the duty of disclosure and subsequently not disclosing material facts to the risk is:

• Policies being voided – creating yet another incident to disclose in future policies.
• Claims being denied.
• Increased premiums.

While the duty to disclose is placed on the business, this is where brokers will find themselves yet again in the spotlight.

With our obligations to proactively ensure a fair outcome for clients, we must ensure stringent procedures to gather relevant information, share it with insurers – whether going direct or via a wholesaler – and store those details to ensure full disclosure in future years when re-tendering policies or offering different classes of cover.

Failing to take these steps as a broker can lead to reputational damage and the possibility of an FCA investigation – not to mention a possible professional indemnity claim from a letdown client.

Until the duty of disclosure element within insurance policies becomes clearer and more consistent, brokers must continue to guide clients to avoid inadvertent misrepresentations and protect them from unintended consequences.