Insurance Broking Practice and the Law
A fixed period policy will expire or lapse at the end of the policy period (see chapter 12). The insured and insurer may, however, agree to renew the contract. The term “renewal” is misleading as, technically, if there is such agreement, a fresh policy will be issued, albeit (and again unless there is an express agreement to the contrary) on the same terms as the expiring policy. “Renewal” in its narrower sense reflects an agreement between the insured and the insurers subscribing the expiring policy to renew that policy and should be distinguished from the wider situation where the policy lapses and the insured obtains different cover from different insurers on different terms.1 In practice, that distinction is often lost. In respect of any type of policy where the insured will require cover year on year, we talk instead of “renewal season” and what happens “on renewal” simply to denote the period when one policy lapses and the insured seeks new cover going forward. Further, in a subscription market such as the London Market, it will be extremely rare that all subscribing insurers on one policy year renew their line the following year. One or more of a group of subscribing insurers may decline to renew. Alternatively, although it will be usual at renewal for the broker first to approach the lead insurer on the expiring year, he is generally under no obligation to do so. It may be prudent, for example, to switch leaders in the light of prevailing market conditions or a fundamental change to the nature of the risk. In this chapter, the term “renewal” is used in its wider sense, unless the contrary is specifically indicated.
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