Damages for paying claims late
Written by Charlie Palmer on 10/08/2018

The Enterprise Act will apply to new policies governed by UK law, which are issued (or re-issued) after 4 May 2017.


Under previous legislation, damages for late payment of claims were not recoverable from insurers.  Insureds could only recover what was what was insured, and not subsequent consequential losses.  Under the new Act, sums due must be paid within a “reasonable time”.  Obviously breaches of this term may give rise to yet more claims against the insurer – this time for damages.  What exactly is a “reasonable time” will depend on the circumstances of each case. 

As there is a possibility that an insurer will have to pay damages for late claims, this is both good news and bad news for you the broker / IFA.


First, the good news. If you have made a claim on your PII for, say, misselling pension transfer, then this is covered, bar the excess. However you normally have to pay the claim first, and collect the cash from the insurer second. This in the past has led to cash flow problems for IFA firms. This means more money has to be retained as cash and less is available for distribution or spending.

Now the not so good news. If you have a hand in the claims process, then you could be held liable for being slow. This is especially alarming for those with delegated authority (the FCA permission of “dealing as agent in non investment insurance”). But IFAs often step in to help an heir with a life assurance claim. You may be better to remove yourself from the process if your admin isn’t smoothed along by your Oxbridge educated Friday girl.  Oh, that you should be so lucky.  Now IFAs are not noted for super fast response rates – it goes against the grain of this most leisurely pursuits of charming the rich. IFAC believe that “all good things come to those who delegate” and we suggest you take note of your new added liabilities to get things done in a speedy manner.

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