My Lords, like the noble Baroness, Lady Noakes, we were rather sorry to see these amendments tabled by the noble Earl, Lord Kinnoull, as we support Clauses 20 and 21, which help consumers and businesses facing delayed payment of insurance claims to get damages for resulting losses. We certainly do not want to see these provisions watered down. Indeed, as the noble Baroness, Lady Noakes, recalled, it was the Law Commission and the Scottish Law Commission which recommended that insurers should be under a legal obligation to pay valid claims within a reasonable time. I thought it was the Law Commission which drafted these clauses and I am delighted to be in the Room with the true author.
The Bill puts the current FOS practice, which is to award compensation for unfairly refusing or delaying insurance claims, on to a statutory footing. Importantly, it will provide small businesses with recourse to the courts to claim such damages. As we have heard, Amendments 52A and 52C would remove the insurance of large risks from the provisions of Clause 20. That would effectively exclude many SMEs and their risks from the very protections that the Government—in our view, quite rightly—are seeking to introduce.
As we have heard, it is not just the Opposition who resist these and indeed the later amendments, which bring insurance contracts into line with any other normal contract. Some 80% of those responding to the Law Commission’s consultation agreed that insurers should be under a legal obligation to pay valid claims within a reasonable time. Our understanding is that not a single member of the ABI was against the clause. Indeed, some were strongly supportive, pointing out
that for their SME customers, a claim being paid in a few months can be the difference between survival and failure.
It is almost a legal fiction which means that the normal contract law—that is, if one party breaks a contract, the other can claim damages—does not apply to insurance law in England. It is time to change this. The Law Commission is clear that this is appropriate for the London market and it opposes the attempt in these amendments to exclude it. Any carve-out for “large risks”, as defined in Solvency II, would exclude many consumer and SME risks. I leave the Minister to take the Committee through the finer details of the Law Commission’s argument, should she feel it necessary. I would just add that in regard to excluding some forms of large risk, the Law Commission found that stakeholders were keen to see a single regime for all non-consumer contracts and did not support defining somewhat arbitrary boundaries, which add to transaction costs.