Late payment of insurance claims (Cathy Hawkins)
Thursday, May 25, 2017
May is the month when… …statute provided a (limited) remedy for policyholders where their insurers have unreasonably denied or delayed payment of a claim. This has come about because the Enterprise Act 2016 brought into effect s13A of the 2015 Insurance Act.
Previously the only remedy for policyholders was a court awarding interest. Scant comfort if the business’ ability to trade was lost or impaired as a result of the delay, as even an award of higher rate interest would be nowhere near the loss suffered.
It’s important to remember insurers will have a defence if their failure or delay is deemed reasonable, and this will apply sometimes where it may be considered reasonable but ultimately wrong to contest the claim.
Crucially insurers are entitled to spend appropriate time investigating and assessing a claim. What is appropriate will be very fact-specific but it will not count against insurers if they are awaiting reasonably requested information from the policyholder or other enquiries.
So, policyholders will be wise to respond as well as they can to requests for information where they are reasonable and probably challenge enquiries that seem unreasonable or scattergun.
This is where a claims professional assisting the policyholder, especially one without resources or know-how, can ensure the dialogue and information flow supports prompt claim settlement and can equally be evidence, if the insurer delays unreasonably, in rebutting the insurer’s defence.
It will be some time before the courts get the opportunity of considering a claim for damages for late payment. In any event the new provisions may serve as a deterrent to poor claims practice. Meantime, feedback is awaited on whether this assists the speed of settlement. Especially in the SME market where claims satisfaction was considered low by the FCA’s Thematic Review in 2015.