We previously reported that the Government's Enterprise Bill would seek to tackle the problem of late payment of insurance claims. The Bill had its second reading in the House of Lords on Monday 12 October 2015. The provisions regarding late payment of insurance claims were discussed and there were some strong words of support for the introduction of an obligation on insurers to pay claims in a reasonable time.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills and Department for Culture, Media and Sport, Baroness Neville-Rolfe, introducing the Bill, said:
"Under current law, there is no obligation for insurers to pay valid insurance claims to businesses within a reasonable time. These payments are vital for a business struggling to survive after an unexpected tragedy, such as a fire, break-in or flood. In the most serious cases, a business waiting for a late insurance payment can collapse. The Bill will make sure that insurers are under a legal obligation to pay up within a reasonable timeframe. Where this does not happen, they will be liable to pay damages. This provision is based on careful and detailed recommendations from the Law Commission, which worked closely with stakeholders to develop the criteria in the Bill and our proposed approach."
There was also strong support from Lord Patten who said:
" … there are the provisions, which I also applaud, to deal with the financially repressive late payment of insurance claims. I think that these will have a much more instantaneous effect through the proposed introduction of a new Section 13A in the Insurance Act 2015 with an obligation to big business, in particular, in the insurance world to pay within a reasonable time all contracts of insurance. The insurance industry does not have to wait for the introduction of the provisions of this Bill; it should start doing it today. It has it in its power to do it today and it knows that these measures are coming. It is bad business for the industry not to start straight away.
It is wrong for some companies in the insurance industry, most of which I greatly admire, to delay payments quite deliberately as a matter of policy, massaging their figures, particularly in the run-up to interim or final results, to make the reported figures look that tiny bit better because they have paid out that tiny bit less—delays that have ruined some tiny businesses. Any such activity can hinder, or at worst torpedo, the efforts of small businesses to get back on their feet after, for example, the catastrophic floods, which the Minister referred to recently, down on the Somerset levels near where we live and have our webbed feet, and in other areas on the River Thames that were hit. However, nothing will work as well as it should do until all big corporates recognise that looking after their suppliers or those that they insure is simply good for enterprise, good for business and therefore good business."
The Bill still has a long way to go before it receives Royal Assent and becomes an Act of Parliament. We will keep you updated with any key developments as the Bill proceeds through the House of Lords and then the House of Commons.