Georgina Squire, Head of Dispute Resolution at Rosling King, said late payment of claims is often a major cause for complaint on the part of an insured who pays their premium for their policy on time and expects their insurers to then play their part in the event a claim is made.
She said: “All too often, particularly if the claim is large, the insured can find itself chasing an insurer to pay it, or dealing with what seem like endless protracted requests for information from the claims advisors. Very often, the only recourse for the insured is to invoke the dispute resolution provision in the policy – a step destined to create even greater and protracted conflict between insurer and insured, and with it, additional cost and, most importantly, even longer delay in seeing the claim paid. The new proposal contained in the Enterprise bill published by the government could change this situation significantly.
One of the major issues for insured entities in the UK is that, unlike most other jurisdictions, there is no legal basis on which a business can recover its loss/damages from its insurer caused by delay in payment of a claim. They may be able to claim interest for part of the period of delay, at best. At current interest rates, that often does not provide enough recompense for an insured whose business has been stifled by the issue the subject of the claim.
“This often happens in the context of property and business interruption claims. An example would be a fire or flood in a business premises, not only causing damage to stock and machinery, but also causing the business to close for a while. Whilst large businesses may be able to survive the delay, smaller businesses can find it stifling or worse, it can be the catalyst for putting them out of business. A right to damages for the late payment of claims was initially going to be included in the Insurance Act 2015, but due to disagreement as to how it would operate, it was dropped.
“The current proposal is to include in every insurance policy a requirement on the insurer to pay sums due within a ‘reasonable time”. One major issue for future debate will be the definition of “reasonable time”. The Bill tries to assist by listing matters which should be taken into account when assessing this time period. The list includes issues such as allowing time to investigate a claim and allowing for contracting out of the default rules for non-consumer insurance contracts, provided that the insurer satisfies the transparency requirements set out in the Insurance Act 2015 (unless the breach of the term is deliberate or reckless, in which case any ‘contracting out’ term will have no effect).
“On the assumption the Enterprise Bill becomes law and this provision remains in it, it is assumed that the Insurance Act 2015 will have to be amended to include it after all.”
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