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The Enterprise Act 2016 – Late Payment of Claims

The 4th May 2016 saw the Enterprise Act 2016 become law.

The legislation applies to all insurance policies that are placed or renewed on or after 4th May 2017 that are subject to the laws of England and Wales, Northern Ireland and Scotland.

The purpose of the Act is to ensure that insurers make claims payments promptly and to ensure that, should there be any delays which results in additional losses incurred by the insured, the insured has sufficient recourse to recover those additional cost from the insurer.

There is, within the Act, provision for an insurer not to breach the ‘late payment’ of claims if they can justify any delays on ‘reasonable grounds’.

The Act stipulates that insurers must take a ‘reasonable time’ to make payments for valid claims.  Within the ‘reasonable time’ terminology the Act takes into account:

  • The type of insurance
  • The time required to investigate and evaluate the claim
  • Any aspect including compliance, regulatory or other mitigating factors outside of the control of the insurer
  • The complexity and the size of the claim

Insurers can, if they wish, opt-out of this section of the Act but in doing so must meet the transparency requirements within the legislation. This requires the insurer to ensure that the customer is completely aware before any contract is entered into that the ‘late payment of a claim’ legislation does not apply.  This is not an option for consumer contracts or commercial contracts when the insurer is considered to have acted in a ‘reckless or deliberate’ manner.

Once a claim has been paid in full the policyholder has one year to make any additional claims for losses due to delays in the settlement of the original claim.

If you are unsure as to how this may affect you or you have any questions regarding this aspect of the Enterprise Act please contact us.