Conflict management vital under the Insurance Act 2015

The application of proportionate remedies to liability claims under the Insurance Act is going to cause many practical issues. With insurers paying, for example, half of any compensation, half of the claimant’s legal costs and expenses and half of the insured’s own defence costs following a commercial insured’s non-disclosure, insureds are likely to want far more involvement in choosing lawyers and handling negotiations. Issues may also arise where there are competing drivers causing opposing views, for example reputation concerns. Situations will need to be dealt with on a case by case basis and solicitors will need to ensure clear agreements and procedures are in place to manage any potential conflicts, while also ensuring any following market and reinsurers are in the loop.

The Internet of Things: cutting-edge monitoring as standard

Innovation will be the new normal as monitoring through the Internet of Things (IoT) moves from the boiler in your smart home to large scale industrial processes. In turn, the role of insurance is set to change from reinstatement to prevention. Products will be developed that not only notify a leak as it happens but warn of the event in advance of it happening. With a reduction in incidents may also come a reduction in premiums, but there is also great opportunity. This technology offers insurers a far closer, real-time, continuous engagement with their insureds. As insurers review policies and procedures in light of recent insurance legislation, they also need to review how they use these technological developments to assess risks individually. It is crucial for insurers to manage their customer relationships now, clearly explaining what is expected and sharing learning and experiences. Just watch out for the tech companies eyeing insurers’ market, data and relationships.

Late payment claims will become common from 2017/18

Claims for damages for late payment of insured losses will become common in policy coverage claims in 2017/18. With the Enterprise Act provisions applying to policies incepted or renewed from 4 May 2017, claims under such policies are likely to be accompanied by demands for damages with little concern about the evidence in support. It will be relevant in every negotiation and mediation despite the Law Commission finding no evidence of systemic late payment. Until we receive judicial guidance on such claims, this risk is unlikely to go away.

Wake up call for landlords as energy efficiency standards threaten investment

With less than two years before the Minimum Energy Efficiency Standards start to bite in April 2018, insurers need to ask both residential and commercial landlords more specific questions about energy efficiency and occupancy. Insurers also need to consider the impact on their reinstatement provisions. Investors with energy-inefficient commercial buildings or residential property will need to take action now or risk their portfolio becoming unmarketable. A reduction in let property may inturn cause overcapacity and a softening of the insurance market.

Key developments in 2015/16