From 4 May 2017, the Enterprise Act updated the law to enable policyholders to recover unlimited damages caused by the late payment of claims from insurers. This is not a penalty against insurers for negligently delaying payment. Policyholders must demonstrate and evidence the actual loss they have suffered and show that it was caused by a delay in the payment of a claim. Any damages claim against the insurer must be brought within 1 year of the claims payment under the policy. We have conducted a survey of insurers, brokers and loss adjusters to understand the expected impact of the Act. Here’s a summary of the key findings. Visit our hub to access information and resources tailored to brokers: www.brownejacobson.com/brokers

1. www.brownejacobson.com/brokers
0370 270 6000
Historically, policyholders have had no action against insurers for the late payment of valid insurance
claims1
. Insurers’ ability to delay the payment of claims has resulted in additional losses to policyholders,
which in extreme cases has led to businesses becoming insolvent.
“ It is absolutely vital that insurance companies also pay out quickly…
Unnecessary delays by insurers can spell the end for vulnerable businesses.
” Sajid Javid, former Business Secretary
From 4 May 2017, the Enterprise Act updated the law to enable policyholders to recover unlimited damages
caused by the late payment of claims from insurers. This is not a penalty against insurers for negligently
delaying payment. Policyholders must demonstrate and evidence the actual loss they have suffered and show
that it was caused by a delay in the payment of a claim. Any damages claim against the insurer must be brought
within 1 year of the claims payment under the policy.
We have conducted a survey of insurers, brokers and loss adjusters to understand the expected impact of the
Act. A summary of the key findings is set out below:
Is the Act necessary?
According to our survey, less than one-third of brokers
surveyed (32%) think the Act is necessary. This is
supported by the fact that only 6% believe the Act
will actually speed up claims payments. The principal
reason for these low figures is likely to be summed up
by one participant, who commented, “[I] largely see
[the Act] as enforcing existing good practice and only
relevant to fringe carriers”.
1
This was confirmed in the Court of Appeal case of Sprung v Royal Insurance [1997] CLC 70.
Enterprise Act 2016 and its impact on brokers...
survey results
6%32%
think the
Act is
necessary
believe the
Act will speed
up claims

2. Who is responsible for delays in claims
payments?
Interestingly, but perhaps unsurprisingly, views
differed significantly between brokers and
insurers as to the reasons why some claims
are not paid promptly. Brokers cited delays by
insurers in processing claims (35%) and coverage
investigations by insurers (24%) as the most
common reasons for delays in claims being paid.
Insurers, on the other hand, considered that
policyholders being slow to provide information
represented the most common reason for delays.
Effect on claims payments
There is no overall consensus amongst insurers or brokers as to whether overall claims payments are likely to
increase as a result of the Act. This uncertainty was summarised by one respondent, who said, “we consider
it will be some time before the full effects become apparent to brokers…”.
Insofar as the Act does increase overall claims payments, only 17% of brokers consider the current soft market
will prevent insurers recouping this additional cost by increasing premiums. By contrast, 58% of insurers think
the soft market will prevent them from passing the costs on to policyholders. Again, this shows a marked
difference between the perceptions of insurers and brokers.
The use of interim payments
Interestingly, 53% of brokers consider it likely that there will be an increase in the
use of interim payments by insurers. It is not yet clear how - or if - interim payments
will be used more often, although if they are, it is likely that insurers will want to use
them to minimise the prospect of late payment damages being awarded against them.
Such payments may take the form of payments for parts of claims (e.g. if certain
elements of the claim require less investigation, those losses may be paid first) or
interim payments whilst investigations are ongoing. The use of interim payments is an
area where the views held by brokers and insurers are consistent – 53% of insurers also
considered there would be an increased use of such payments.
Are you ready?
Only 40% of brokers and 41% of insurers consider they are
fully prepared for the Act. This is supported by the fact
that only 16% of insurers and 24% of brokers have updated
their documents, including policy documents, TOBAs
and commercial agreements to account for the changes
introduced by the Act. It is clear from our survey, and from our
conversations with our clients and contacts that the level of
knowledge of, and preparedness for, the Act is patchy at best.
talk to us...
If you do require any assistance with your preparations for the Act, or if you would simply like the opportunity
to discuss its impact with one of our experts, please contact Tim Johnson on +44 (0)115 976 6557 or email
tim.johnson@brownejacobson.com. Further information can be found at www.brownejacobson.com/brokers
35% delays by
insurers
Why brokers believe
claims are delayed...
24% coverage
investigations
by insurers
53%
of brokers
and insurers
expect an
increase
in interim
payments
Insurers
considered that
policyholders
being slow
to provide
information
represented
the most common
reason for delays.
Are you fully prepared for the Act?
40%
Yes60%
No
brokers
41%
Yes59%
No
insurers
Our survey was carried out between 8- 21 March 2017. Of the 74 respondents that participated
in our survey 52% were insurers/reinsurers, 23% brokers, 10% loss adjusters and 15% others.
All percentages quoted in this report have been rounded to whole numbers. Browne Jacobson
is grateful to all those that kindly gave their time to participate in the survey.