Client Alert: The Enterprise Bill 2015

The Enterprise Bill (“the Bill”) had its third and final reading in the House of Lords last week and (assuming that there are no delays or significant amendments when it returns to the House of Commons early next year) it is anticipated that it will come into force in 2017.

The Bill will amend the Insurance Act 2015 to introduce a new obligation on insurers to pay claims “within a reasonable time”.

Should they fail to do so, a policyholder will have a right to sue an insurer for damages in addition to the payment of the claim.

In a late amendment to the Bill, the Government has inserted a one year limitation period in respect of any claims issued by a policyholder with regard to any alleged late payment.

The one year limitation period will run from the date when all of the sums to be paid, have been paid.

This new one year limitation period is possibly an attempt to mitigate the potential for claims costs and reserves to dramatically increase as a consequence of this new right for policy holders to sue insurers.

But what is a “reasonable” period of time?

This will depend on several factors including the type of insurance and the size and complexity of individual claims. An insurer can successfully defend a claim if it can establish that there were reasonable grounds for disputing that claim.

In considering whether there were reasonable grounds for disputing the claim, the courts will take into account the conduct of the insurer in handling the relevant claim and the information supplied by it to the policyholder throughout its investigations.

Keoghs View

The Bill is likely to have a significant impact on first party fraud investigations in particular and specifically how they are conducted.

There will be a greater emphasis on the timescale for completing the fraud investigations and the information provided to the policyholder in respect of them.

Insurers need to be prepared to amend their claims handling processes appropriately, so as to alleviate the risk of claims being issued against them.