Proposed damages for late claims payment in UK set to transform landscape says leading lawyer

Meanwhile, the International Underwriting Association of London's (IUA) director of market services, Chris Jones, has moved to flag his organisation's surprise and disappointment that such proposals look set to be introduced. He hopes that they will be watered down before passing into law. It looks likely that commercial policyholders in the UK will soon be entitled to damages for late payment of insurance claims under a surprise addition to the Enterprise Bill announced late last month. The bill, which is intended to cut red tape for business, included provisions on damages for late payment that were first set out in the Law Commission's draft Insurance Bill released in July 2014. Damages for late payment in the Enterprise Bill, published this September, replicate the original Law Commission proposals, which were dropped from the final version of the Insurance Act after they proved too controversial. Although the draft Enterprise Bill is not being consulted upon, there will be some scope for debate during the parliamentary process. However, the bill is expected go through with damages for late payment included. Should the bill proceed as planned, damages for late payment would likely apply to insurance contracts incepted after March 2017.hideThis week Georgina Squire, Head of Dispute Resolution at Rosling King, said that the UK government's plans to penalise insurers that do not pay claims promptly or without good reason for delay could result in a 'transformation of the claims landscape'. She said that all too often insureds find themselves chasing an insurer for claims payment or dealing with endless protracted requests for information. This is especially evident in large claims, she said. Often the only recourse for the insured is to invoke a dispute resolution. This is destined to create even greater and protracted conflict between insurer and insured, said Ms Squire. Such action brings additional cost and, most importantly, even longer delays in the claim payment. According to Ms Squire: "The new proposal contained in the Enterprise Bill published by the government could change this situation significantly." She noted that while large businesses might be able to survive delays in claims payment, smaller firms can find them stifling and potentially life threatening. John Hurrell previously told CRE that damages for late payment is not such a big issue for Airmic members that tend to be larger businesses with the capacity to survive a claim delay and the clout to resolve their own issues. As a result, the association has not lobbied for the Enterprise Bill to go through. However, Airmic said that it supports the proposals to address damages for late payment, noting that the changes will bring the UK in line with other jurisdictions. Mr Hurrell said the reforms laid out in the bill 'are the right thing to do and will bring the law into line with most other jurisdictions'. "The bill seeks to introduce an incentive for insurers not to delay proceedings unreasonably, whilst maintaining the right for insurers to take a reasonable period of time to undertake proper investigations of the claim," he explained. Ms Squire noted that the current proposal would see a requirement for insurers to pay sums due within a 'reasonable time'. The definition of reasonable time is likely to cause debate as the bill passes through parliament and could potentially be a sticking point in practice, if and when the proposal becomes law. Writing in its newsletter, the IUA's director of market services, Mr Jones, said the association is disappointed to see the proposal for legal damages revived so quickly after removal from the Insurance Act and included, 'somewhat surprisingly', in a piece of proposed legislation not directly related to insurance. He wrote that the IUA's Legal and Regulatory Committee is now considering how best to represent its members' views on this subject. He said the IUA will be 'watching carefully and hoping to see some items left on the cutting room floor' before the Enterprise Bill comes to pass. He stressed that IUA members have been supportive of the need to reform insurance contract law in the UK. He said the association worked closely with the Law Commission as it developed a new legal framework relevant to modern industry under the Insurance Act. However, damages for late payment was one area that did not seem to be central to the reform programme or a problem in existing law, said Mr Jones. The IUA argued that this demand is inappropriate for large wholesale risks that its members assess on a daily basis. "Claims in such cases can be extremely complex and often do take time to properly investigate and assess. Complaints of London Market insurers unnecessarily delaying claims are low since effective claims handling saves time and money and is a key function of a firm's reputation," said Mr Jones. "Of course, it is important that where an insurer does unreasonably delay or refuse to pay a valid claim clients have legal mechanisms in place to obtain suitable redress. Various possible avenues are already in place here and statutory reform does not seem to be necessary or proportionate," he added.

Proposed damages for late claims payment in UK set to transform landscape says leading lawyer

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