Powers of Enterprise Act 2016 mean that providers must become more proactive
The Enterprise Act 2016 came into force on 4 May. While it covers a variety of matters, one item that is noteworthy for the insurance industry is the provisions relating to the late payment of insurance claims.
Part 5 of the Enterprise Act amends the Insurance Act 2015 by inserting a new clause, 13A. This provides that every contract of insurance entered into on or after 4 May 2017 will contain an implied term that if a claim is made under the contract of insurance the insurer must pay any settlement within a reasonable time. If the settlement is not paid within a reasonable time then the insured may claim damages against the insurer for such late payment.
What is a reasonable time?
A reasonable time will include time for the insurer to assess and investigate the claim and will take account of:
the type of insurance
the size and complexity of the claim
compliance with any relevant statutory or regulatory rules or guidance
factors outside the insurer’s control.
The insurer will not be in breach of the new requirements merely by failing to pay the part of the claim disputed if they can show that there were reasonable grounds for disputing the amount payable or whether anything is payable. However, the conduct of the insurer in handling the claim may impact on the test of reasonableness. Insurers will have to be more proactive in dealing with matters – exercising control over appointed loss adjusters, for example – and proposing or accepting offers of alternative dispute resolution.
Application and contracting out
As the effect of the provisions of the Enterprise Act is to insert additional clauses into the Insurance Act 2015, the new provisions will only apply to insurance contracts governed by the laws of the UK (England and Wales, Scotland and Northern Ireland). The provisions will apply to both consumer and non-consumer contracts but there will be the ability to contract out of the provisions for non-consumer contracts only. Where an insurer wishes to contract out of the new provisions in a non-consumer contract, this has to be dealt with in the same way as contracting out under the Insurance Act.
Any clause that attempts to put the non-consumer in a worse position than would be provided by the new provisions in respect of deliberate or reckless breaches of the provisions by the insurer will have no effect.
When can a claim for damages for late payment be brought?
If the insured wishes to bring a claim for damages as a result of late payment of a claim, this must be done within 12 months of the settlement of the claim being made.
If you have any queries please contact your Lockton account servicing team.
Lockton Companies LLP is ACCA’s recommended broker for professional indemnity insurance. For more information, please contact Lockton on 0117 906 5057.
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