Insurance market reaches agreement on Enterprise Bill clause to speed claims payments
Government agrees to consider proposed amendments to Enterprise Bill
Key players in the London market have agreed to support changes that will enable companies to secure damages for late payment of insurance claims. The deal represents an unprecedented amalgamation of the UK insurance industry to back reform that will enhance customer experience and increase the attractiveness of the sector.
The deal was orchestrated by Mactavish and Airmic working together for the benefit of both policyholders and the London Market. On the basis of these proposals, the London Market will not encourage the tabling of further amendments to clauses 20 or 21 of the Bill.
The specialist advisory firm Mactavish, Lloyd’s Market Association (LMA), International Underwriting Association (IUA), Lloyd’s and Airmic (the association that represents commercial insurance buyers) wrote to Business Minister Baroness Neville-Rolfe expressing support for the Enterprise Bill, subject to certain recommended amendments. The measure, currently under consideration by the House of Lords, includes a controversial clause obliging insurers to pay compensation to commercial policyholders if valid claims are not paid within a reasonable timeframe.
The letter recommends significant changes to the legislation addressing concerns expressed by the London market. If accepted, the amendments will put a time limit of one year on claims for damages from policyholders, and insurers will not be obliged to disclose privileged legal advice received in the defence of the claim. The proposed amendments to the Bill were drafted by Colin Edelman QC and Richard Harrison of Devereux Chambers after being instructed by Mactavish.
The measure is strongly supported by Airmic, which has been campaigning to provide greater security and guaranteed cash flow for companies in the event of having to make a major claim. The Bill had previously already won the support of three other organisations representing insurance underwriters and intermediaries – the Association of British Insurers, the London International Insurance Brokers’ Association and the British Insurance Brokers’ Association.
The proposed amendments set out in the ‘market letter’ were tabled and debated at length in the House of Lords on the evening of Wednesday 25 November. The Government rejected the amendment on privilege but agreed to consider the amendment on limitation. The original policy objectives of the damages for late payment of insurance claims provision in the Bill has been preserved throughout this.
“This is a great overall result for the London insurance market, its customers and the UK insurance industry as a whole. The legislation is intended to protect otherwise healthy businesses that might depend on receiving prompt payment of an insurance claim. It will benefit insurers in the UK by making them more attractive to their potential customers,” said Mactavish CEO Bruce Hepburn.
“Mactavish decided to take the lead on this matter in respect of the legal analysis and negotiating market wide support to ensure amendments were proposed to address the legitimate concerns of the London Market, whilst ensuring the legislation was passed to deliver the benefits and rights that all policyholders should have in terms of contract fairness,” added Bruce Hepburn.
“The Enterprise Bill will further stimulate the growth of professionalism within the London market. Taken together with the passing of the Insurance Act earlier this year, it represents a step change in the way the industry treats and relates to its customers,” said Mactavish special advisor and former Law Commissioner, David Hertzell.
Devereux Chambers commented: “Colin Edelman QC and Richard Harrison were delighted to have been instructed by Mactavish to provide an Opinion on clauses 20 and 21 of the Enterprise Bill. Our brief was to address the concerns expressed about the Bill and assist in identifying a suitable solution to any concerns we considered to be legitimate whilst maintaining the aim of achieving fairness for policyholders faced with late payment of insurance claims.”
The Enterprise Bill is expected to become law in 2016.
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Notes for Editors
Mactavish specialises in the analysis of commercial risk, insurance policy reliability, disclosure, placement procedures and conduct and insurance governance standards. Mactavish work with corporates, helping them to increase the reliability and governance of their insurance, and with carefully targeted brokers and insurers to deliver improved insurance solutions, leading to higher standards of governance, the provision of more flexible levels of capacity and clearer policy wordings that are more robust when tested by large losses. The company is unique in its focus on establishing standards across the insurance industry which will be fair and work for all parties.
Mactavish also designs and undertakes a range of unique and proprietary large scale studies across the corporate insurance landscape, focused on changes in the world of corporate risk. Throughout the legislative process leading to the Insurance Act, the Law Commission and Mactavish cooperated closely, with Mactavish research being the single largest primary evidence source for the Law Commission’s work.