Part 5: Late Payment of Insurance Claims Section 28: Insurance contracts: implied term about payment of claims
Section 28(1) inserts a new section 13A into the Insurance Act 2015 which will imply a term requiring the insurer to pay sums due within a reasonable time into all contracts of insurance made under the law of any part of the United Kingdom.
	Breach of the new contractual term in insurance contracts will give rise to the usual remedies for breach of contract, including damages for loss.
	Sections 13A(2) and (3) make further provision about the meaning of a "reasonable time". Under section 13A(2), this will always include time to investigate and assess the claim. Section 13A(3) makes clear that what is reasonable depends on all the relevant circumstances and contains a non-exhaustive list of factors which might be relevant in considering whether the insurer has acted within a reasonable time.
	The type of insurance involved may be relevant because, for example, claims under business interruption policies usually take longer to value than claims for property damage. In terms of size and complexity, larger more complicated claims will usually take longer to assess than straightforward claims. A claim may be complicated by its location, for example: if an insured peril occurs abroad, it is possible that investigation will be more difficult.
	The reference to relevant statutory or regulatory rules or guidance might include, for example, rule 8 of the Financial Conduct Authority’s Insurance: Conduct of Business sourcebook (ICOBS) on claims handling, and paragraph 27 of Schedule 1 to the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277) relating to commercial practices which are in all circumstances considered unfair.
	Factors beyond the insurer’s control might delay payment. For example, investigations may be held up because the policyholder or a third party fails to provide relevant information in a timely manner. An insurer’s decision may also be dependent on the actions of another insurer. This may arise as a result of the interaction between business interruption and property insurance, or in the subscription market where a follower may be dependent on the lead insurer.
	Section 13A(4) gives the insurer a defence to a claim for breach of the implied term where it had reasonable grounds for disputing the validity or quantum of a claim. Whether the insurer had reasonable grounds is intended to be judged objectively.
	Section 13A(4)(b) provides that the insurer’s conduct in handling the claim may be a relevant factor in deciding whether the term was breached and, if so, when. An insurer who has a reasonable basis for disputing a claim or at least conducting further investigations may nevertheless be found to be in breach of the implied term if, for example, it conducts its investigation unreasonably slowly, or is slow to change its position when further information confirming the validity of the claim comes to light.
	Section 13A(5) preserves the distinction between claims for breach of the implied term and (a) the substantive insurance claim and (b) claims for interest on the insurance claim, whether contractual, statutory or otherwise. Breach of the implied term must be argued and proven separately.
	These provisions have UK wide extent, as do the other provisions of the Insurance Act 2015. They deal solely with reserved or non-devolved matters.