Legislation that would entitle commercial policyholders to damages for the late payment of claims has passed a major legislative hurdle. The Enterprise Bill received its second reading in the House of Lords, despite some vocal opposition. Airmic CEO John Hurrell welcomed the measure’s progress, which followed an intervention by the specialist insurance consultancy Mactavish.
He said the legislation represented “another big part of the jigsaw that will give the UK a modern, customer-friendly claims regime and make the London market an even more attractive place to do business.”
The measure contains a controversial clause, initially opposed by the two main associations for London market insurers, obliging insurers to pay legitimate claims within a reasonable time or face the prospect of legal action. Although the change would bring English and Welsh law into line with virtually all other major jurisdictions, it was strongly criticised in the run-up to the debate. Speaking in an earlier session in the House, Lord Flight had warned that it would make insurance more expensive and lead to insurers deserting London altogether.
Before the Lords’ vote on November 26, Mactavish negotiated a deal between the Lloyd’s Market Association, International Underwriting Association and Airmic after consulting a leading QC. The four organisations signed a joint letter to government supporting the clause but recommending two changes to protect the interests of insurers.
The first would provide a time limit of one year for claims for damages from policyholders, from the date of the outcome of the original claim. The second would allow insurers not to hand over privileged information gained during the defence of the claim. In the event, peers agreed to consider the first amendment, but rejected the second one.
The Bill now has a third reading in the Lords – normally a formality – before going to the House of Commons. With government support, it is expected to become law next year.
Hurrell said that, with the Insurance Act coming into law next August removing some of the draconian penalties against policyholders, Airmic members would enjoy an unprecedented measure of contract certainty provided they presented their insurers with reliable data that gave a fair presentation of the risk.
“I would like to thank the London market for listening to the views of buyers, and I pay tribute to Mactavish for helping to find a way forward in the discussions over the Enterprise Bill,” he said.