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Enterprise Act 2016 - late payment of insurance claims

12 May 2016

The Enterprise Bill was granted Royal Assent last week and comes into force on 4 May 2017.

Currently, subject to policy terms, insurers are under no obligation to pay claims within any specified timeframe. Insurers’ perceived excessive delay in paying claims has prompted the imminent introduction of an implied term requiring payment within "a reasonable time". The Bill provides the right to a remedyfor example, damages” in addition to interest and the right to enforce payment.

What constitutes a reasonable time will be case-specific and will probably be the focus of litigation following the changes. This remedy may even apply in the event of a policy dispute, if a decision by insurers is held to be unreasonable.

Insurers are permitted to contract out and may well seek to do so, unless challenged by larger brokers with the buying power of scheme wordings behind them. Either way, insurers should clarify their wordings and associated documentation, and update their claims handling processes to ensure efficiency.

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