Insurance companies should be forced to pay out on insurance claims promptly, without unnecessary delay and to compensate those claimants who have suffered delays, the Law Commission has stated. It has said that legislation should be changed to make it an insurer's primary obligation to pay valid claims after a reasonable time, which many people would have assumed to have been the case anyway. Sadly, this is not always true and some claims do indeed drag on for an unacceptable length of time. When your home or your livelihood is at stake, this is simply not fair and causes immense stress and often poverty.
Insurers who unreasonably delay or do not pay a valid claim should be liable for damages for foreseeable loss, it has been recommended. Currently, in England and Wales, if an insurance company take a long time to pay a valid claim or refuses to pay it altogether, the policyholder can sue: however they cannot claim for any loss they may suffer because of the delay in receiving the money.
Individuals and very small businesses can complain to the Financial Ombudsman Service, which may award compensation, but other businesses have no remedy, the Commission said.
In usual circumstances, if one party breaks a contract, the other may claim damages for any loss they have suffered, as long as it was foreseeable, but judges in England and Wales have decided that the same does not apply to insurance law, the Commission noted.
Evidence which has been gathered by the Law Commission of England and Wales and the Scottish Law Commission indicates that there is wide support for reform from both insurers and policyholders. It is perhaps a simple belief that once proven, it is better to bring a matter to a conclusion and claims outstanding become a nuisance and a moot point, so prompt settlement is better all round.
In a new consultation, the Law Commission propose that insurance contract law in England and Wales should be brought into line with the law in Scotland and follow the principles of normal contract law.
Law Commissioner David Hertzell 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' expectation that valid claims will be paid on time.”
This seems a sensible and down to earth approach and one which will no doubt be met with delight by all those concerned. Pragmatic and straightforward help is what is required by those suffering at the hand of misfortune and this will go a long way to help one and all.
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