The Third Reading of the Enterprise Bill in the House of Lords yesterday marks the point where the detailed scrutiny of that subsection of the Bill relating to the “late payment” clauses passes to the House of Commons. The reality is that the lower House will have little appetite for further consideration of this provision: in part because other aspects are politically more contentious; in further part because the Government has a majority for its legislation in the Commons; and finally because the Commons has little interest in insurance and acknowledges the expertise of the Lords which carefully scrutinised and improved the Insurance Act 2015 less than one year ago.
It seems very likely that those sections of the Bill will become law by the middle of 2016 and the obligation to pay a claim within a reasonable time will apply to policies incepted or renewed from the middle of 2017. There are concerns that have been expressed and considered by the Lords considering the Bill. The amendments both accepted and rejected at this moment of legislative lacunae gives pause for this thought: insurance is a great product that underpins the UK socially, commercially and economically. It may not be perfect and is certainly undervalued and not understood save perhaps amongst the industry itself. Could part of the problem be down to the complexity and uniqueness of its present contractual arrangements? Or a consequence of its unusual legal exceptionality?
For instance and to quote from the Law Commissioner giving evidence one year ago: most people think that a warranty is the piece of paper that drops out of a toaster. Could the amelioration of the remedies for material non-disclosure seem fairer to customers and policyholders? So too the “suspensive” effect where there is a breach of warranty? And also the fact that a policyholder now has, as he does in every other familiar contractual situation, an opportunity to recover damages for breach of contract? (And we record here our view that the common law and the Bill affords many defences and hurdles which will not be easily overcome by the policyholder.)
It is premature to make any judgement on the point but we pose the question: could a less exceptional contract, a law that is a little less complex, a little more “usual” and remedies that are not so harsh ultimately achieve for insurers a better outcome notwithstanding the uncertainty that change brings? A better product for its policyholders and customers easier to understand would be expected to be better valued and perhaps priced? There are many other factors and influences to be taken in to account but perhaps 2016 will mark a point of significant change to the insurance product and to insurers.
Written by Terry Renouf, partner, BLM