Eighteen months since the Insurance Act 2015 came into force the FCA is presently considering whether (and how) more SMEs should fall within the jurisdiction of the Financial Ombudsman Service. At present only smaller SMEs (“micro- businesses”) with €2m turnover and fewer than 10 staff can seek a FOS adjudication on disputed insurance issues. The FCA Consultation, concluding on 22 April, is seeking views on whether eligibility should be extended to small businesses with annual turnover of less than £6.5m and fewer than 50 employees. It is estimated that such an extension would provide an additional 160,000 businesses with access to the Ombudsman. In assessing how to respond to this consultation it is useful to consider the impact of the Insurance Act since the commencement on 12 August 2016. Continue reading
At midnight tonight the insurers’ faithful servant expires: the last commercial insurance policy based on the Marine Insurance Act 1906 will end and on renewal the Insurance Act 2015 will apply. There may be some wrinkles around contracting out and perhaps a multi-year policy could see some limited application of life support to rare atypical policies but Saturday August 12th 2017 marks the first anniversary of commencement of the Insurance Act 2015. From that point the MIA1906 will start to fade until the last claim has been presented, adjusted and paid. Whilst “full” implementation of the Law Commissions’ extensive programme of Insurance Reform will only be in place on May 4th 2018 (the date which marks the first anniversary of the commencement of the “late payment” term) to all intents and purposes the IA2015 is the only show now in town.
The 2016 Queen’s Speech included a “Modern Transport Bill” which was intended to set out the compulsory arrangements for insuring automated driving on UK roads. This title has been shelved and today the Vehicle Technology and Aviation Bill was introduced in Parliament to address this issue.
Last week’s Admiral launch of a social media insurance project raised a number of interesting points. It does seem a shame that it did not quite go as expected but I think that Admiral is to be applauded for taking the initiative here.
It is of course very early days in the history of the Insurance Act. Day 61 since implementation and a long way to go before it approaches the nearly 40,000 day life span of its predecessor. It will be some time, perhaps years, before we will have a body of law on which to make an assessment of its legal quality and this will itself turn on the happenstance or peculiar facts testing terms, no doubt under the strain of a large loss. Yet are there any lessons to be learnt at this early stage?
Having passed through the Lords, the Enterprise Bill yesterday (2 February 2016) completed its next stage in the Commons. The general principles of this Government Bill were debated, after which the Bill was carried easily, by 300 votes to 62. On commencement, Part 5 of the Bill will introduce a new remedy of damages for late payment of insurance claims, which will apply to consumer and non-consumer policies alike. The Bill is expected to return to the Commons in the next few weeks and is very likely to secure Royal Assent in the second quarter of the year.
Technical amendments to the Bill’s clauses dealing with late payment of insurance claims were debated on 25 November in the Lords. The amendments concerned legal privilege attaching to coverage advice to insurers and limitation for claiming damages for late payment of the claim.
A sharply defined limitation period in the law should greatly reduce uncertainty about when an insurer’s new liability for late payment comes to an end. If the Government acts on these amendments, then that would be in place when the Bill is passed next year.
My recent post about these amendments on our RED blog (which explained how they would operate) anticipated that they would probably be adopted by Government at this stage. That has turned out not to be the case.
The Treasury Minister in charge of the Bill, Baroness Neville-Rolfe, closed the debate and called for the amendments not to be pressed. On the first, she said that the Government’s view was that “legal privilege is a complex topic [and] should not be changed in a specific context without very good reason.” She was a little more open to considering the second – limitation – saying that “it might represent an improvement to the late payment clause, which could be in the interests of both policyholder and insurer [and] would like to explore the details of this possibility further and to discuss it with all interested parties.”
These remarks echo comments earlier in the debate by Baroness Noakes, who doubted that the Government would accept the amendments on the basis that they had been tabled relatively late in the day. Baroness Noakes was a member of the Special Bill Committee that scrutinised the Insurance Act 2015, so her remarks carry some weight. She went on to encourage the Minister to consider the limitation amendment in detail before the Bill returns to the Lords for its third reading. That now looks set to happen and it’ll be covered on this blog when it does.
About the Author
Alistair Kinley is BLM’s Director of Policy & Government Affairs.
Alistair is responsible for BLM’s engagement with government departments and regulators on policy and public affairs issues and consultations affecting the firm and its customers. He coordinated BLM’s market-facing activities in connection with the Insurance Act 2015 and the consultations which preceded its publication and introduction in Parliament.
He is a member of the Civil Justice Council (CJC), a regular speaker and experienced commentator on legal and procedural reforms and was a contributing editor to the Law Society’s Litigation Funding Handbook (September 2014).