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Change of law could speed up insurance pay-outs, say Loss Assessors

Loss Assessors have welcomed moves to speed up the pay-out process to businesses and individuals making a valid claim on their insurance policy.

Currently, if an insurance company takes a long time to pay a valid claim for fire damage or other losses, or refuses to pay it altogether, the policyholder can sue but cannot recover any loss they may suffer as a result of the delay. Businesses are entitled to contact the Financial Ombudsman Service (FOS) which may award compensation but this does not provide any protection for small or medium size businesses just above the FOS limits.

The Law Commission of England and Wales and the Scottish Law Commission says it is now time to change the law and are proposing that insurance contract law be changed to reflect normal contract law whereby an insurer’s primary obligation should be to pay valid claims after a reasonable time. More importantly, it is proposing that insurers who unreasonably delay or do not pay a valid claim should be liable for damages under foreseeable loss.

David Hertzell, the Law Commissioner leading the project for England and Wales, said: “In this respect, insurance contract law is unfair, unprincipled and out of step with today’s commercial realities. Small businesses, such as those struggling to get back on their feet after the recent riots, or after floods, are particularly vulnerable to late payment of insurance claims. We are seeking a solution that balances the insurers’ need to investigate claims against policyholders’ expectations that valid claims will be paid on time”.

Reacting to the news, Geoff Williams, director of Manchester-based loss assessors Cherry and Griffiths, said: “This is positive news for businesses and will give them additional protection when making a valid property insurance claim.

“Time is critical to a business faced with the devastating consequences of fire damage or another catastrophe. As well as the physical losses, fire damage causes severe disruption to productivity and can put the survival of the business under threat. It is crucial a claim is dealt with promptly by a claims handler and comprehensively to ensure the business is back on its feet as quickly as possible.

“Insurance companies will explore every possibility to reject a claim but these delays will cost businesses further in loss of income and reputation as well as add to the stress of the business owner”.