Insurance companies need to pay in a reasonable time when a claim is made now that the Enterprise Bill has received its Royal Assent. The law will come into effect in 12 months.
One of the key parts of the new law will be to create an addendum to the Insurance Act 2015, which will include the right to sue for damages for late payments on insurance claims.
This means firms are required to make payments "within a reasonable time", because where a policyholder suffers additional loss because of a delay in payment, they will have a claim for breach of contract and damages against the insurer.
The Association of British Insurers (ABI) has previously explained "reasonable time" depends on factors such as the type of insurance, size and complexity of the claim and compliance with relevant rules and factors outside the insurer's control.
The ABI welcomes the new law because it reinforces "what is already good practice" within the sector.
The British Insurance Brokers’ Association (BIBA) also supports the change and believes it will help reduce the regulatory burden and provide greater transparency around the impact of regulation on business.
BIBA executive director Graeme Trudgill says: "As well as being potentially good news for insurance brokers, this new law benefits their business customers too, particularly because of the change to the Insurance Act 2015 to include damages for the late payment of claims which BIBA lobbied for.
"This is a piece of legislation that we support and which we see as a major economic stimulant."
