Airmic wants claims paid faster

Commercial insurance buyers group Airmic has told the Law Commission that insurers should pay damages to clients when they delay paying claims.

Airmic complains that current law “discourages reasonable behaviour by insurers since there is no penalty for late payment”. It says delays in receiving compensation can cause a business to collapse.

“Effective indemnity depends as much on the timing of payments as the adequacy of the final settlement if a business is to survive the post-loss recovery period,” says the Airmic response to the Law Commission consultation.

“The issue ... has become even more acute in view of the increased difficulty and expense of obtaining bridging finance from banks.”

Foreign competition

Airmic says overseas firm a more favourable legal framework, putting UK businesses at an unfair disadvantage.

Airmic sent a copy of the voluntary speed of settlement agreement it signed with leading insurers last year and wants the Law Commission to use it as a benchmark for future legal changes.

“The insurers that provide our members with most of their cover are generally conscientious about paying in a reasonable fashion, but there are still horror stories of where this has not been the case,” said Airmic technical director Paul Hopkin.

“The law as it currently stands denies the commercial buyer any right to redress when an insurer behaves in an unreasonable manner. Airmic’s submission seeks to bring the UK into line with best practice elsewhere.”

The Law Commission issues paper, “Damages for Late Payment and the Insurer’s Duty of Good Faith,” was published in March.