Enterprise Act 2016: simplifying insurance claims
Ian Gregory, a director and chartered insurance broker at MPW Insurance on a new act that could end late payment of claims.
The Enterprise Act 2016 came into force on 4 May 2017 giving policyholders a right to claim damages in the event of late payment of claims.
The Act applies to any insurance policy placed or renewed on or after that date, if it is subject to the laws of England and Wales, Scotland, or Northern Ireland.
It requires insurers and their representatives to perform such that claims are dealt within a reasonable time frame. If this is not achieved, then the Act will enable the insured to claim for subsequent losses incurred.
What does this mean for those involved in the construction industry?
Many people within the industry expect the main beneficiaries of the new rules will be small to medium-sized businesses. This will include many construction firms and their associated supply chain. The act places the onus on insurers to settle claims promptly, ie in a “reasonable time”. However, this does not stop the insurer from investigating and assessing the claim.
“Reasonable time” is not defined in the new law. Delays in settlement may still occur, depending on the circumstances. Factors influencing slower progress may occur where there are reasonable grounds for disputing a claim or its quantum, the size or complexity of a claim, or factors outside the insurers’ control (such as involvement of other parties or authorities, or to meet legal or statutory obligations).
Other influencing factors are the often complex contractual agreements between all parties to a construction contract.
This also includes claims brought against the policyholder from a third party, such as a trip or slip on a construction site that you wish to dispute. Policyholders have the same protection against inflated or fraudulent claims as before and thorough investigations should still take place.
What are the remedies?
In cases where indemnity has been granted, yet repairs to a building have been delayed: that is, insurers have not approved a contractor. The affected areas remain unfit for purpose, which results in loss of income.
Now, you could receive compensation for a loss of potential income; as long as you take all reasonable steps to mitigate the loss. Claimants have up to one year to submit a compensation claim after settlement is received if they discover that the delay has had additional cost implications.
This is a new piece of legislation, hence there are no legal precedents or case studies that illustrate how it will work in practice. It could be said that the legislation is dealing with a problem that has not been significant to the construction industry as certain claims often take time to resolve, such as construction accidents.
The Insurance Act allowed insurers to “contract out” of many of the provisions. This again appears as an option within the new rules.
The right to damages for late payment of claims will be an implied term in all insurance policies (does not need to be stated in policy documents). Parties can agree to contract out, although this is most likely to be seen where the insurer imposes it and policyholders can only choose to accept it or buy elsewhere.
However, it must meet the same transparency requirements as for the Insurance Act and be clearly drawn to the customer’s attention. Also, if the insurer deliberately or recklessly delays claims, any contracting out will be invalidated and compensation still be claimed for the delays.
How a broker can help
Insurance brokers arrange a vast number of policies across all trades and industries, particularly for their construction clients. A specialist broker with expertise of the construction market should bring you the benefits of their specialist insurer relationships: including the ways in which they will be dealing with the new requirements.
A broker usually acts as your agent in sourcing and arranging insurance and in dealing with your claims. In some cases, brokers will act under a delegated authority to settle claims on behalf of insurers – acting as the agent of the insurer as well as for the customer. In these specific cases, much of the responsibility for meeting the new rules will be with the broker.
Brokers’ Top Tips
- Submit your claim promptly with as much information as you can supply
- Record and copy accurately all documents supplied, noting dates and responses
- Promptly deal with any additional information request or attend any appointment requested by an insurer.
- Ask at the outset, in writing, what would be considered a reasonable time for settlement once indemnity has been granted. If after this date settlement has not been received then you have the ability to use the right to redress in order to speed things up
- Once indemnity has been granted, request an interim payment to aid cash flow if full and final settlement will take a period to resolve.
Ian Gregory is a Director and Chartered Insurance Broker at MPW Insurance, a wholly owned subsidiary of Clear Insurance Management.