If you or a director of your company has had any involvement in a company which has gone into insolvent liquidation, receivership or administration, or if your company or any of the individual directors has any CCJs against their name, this is a “material fact” and it must be disclosed to your insurers.

Insurers do not always specifically ask for this information and disclosure of these past events are often overlooked by policyholders who do not even realise that the information is relevant or material. However If you do not disclose this information to your insurers it can result in the policy being invalidated and claims being rejected for non-disclosure of material facts.

To many, it seems illogical why insurers would even consider this information relevant when underwriting a risk, but we’ll explain why.

Insurers treat past insolvencies, receiverships and administrations and unsettled debts with caution as it can be an indicator that the policyholder is a “moral hazard” and therefore requires further consideration by the underwriter. For example, a company or individual who leaves creditors with unpaid debts might also be more inclined to make a claim on an insurance policy, or might be inclined to take more risks than the average person which is obviously not a characteristic that an insurer looks for in a Policyholder.

When such adverse history is disclosed to insurers, underwriters will often ask about the debt that was left outstanding, the amounts involved, and whether creditors have been paid back.

In many cases, if insurers can understand the reasons behind such occurrences, they will accept the disclosure without charging increased premiums.

Our advice is to always check the financial history of all directors and disclose any matters you think may be material. It is always better to have these sorts of discussions with insurers before you need to make a claim on a policy rather than after the event.

If you want more information on what is material to your insurers, please contact us today.