London insurance market consults on new approach to low-value multi-party claims settlement

Members of Lloyd’s, the Lloyd’s Market Association (LMA), the International Underwriting Association (IUA) and the London and International Insurance Brokers’ Association (LIIBA) have been sent a draft of the new ‘single claims agreement party clause’ for consultation, according to Insurance Day (registration required). Representatives of the four market bodies drafted the clause, following a proposal from LIIBA and the broking community.

The new clause would allow the lead insurer on a policy to authorise claims up to a certain value on behalf of all participating carriers. Parties to the insured risk would be able to agree to adopt the clause at the point of underwriting.

Under the current rules, business written in the Lloyd’s and London company markets is subject to different claims agreement protocols, although syndicates that participate in the Lloyd’s Claims Scheme are bound by the decision of the lead underwriter for ‘standard’ claims within a set class of business thresholds. This means that low-value claims under large insurance policies, underwritten by a number of syndicates, may be handled differently by each of the participants.

The four market bodies agreed to develop a single agreement model back in March. At the time, representatives of each said that the new clause would speed up settlement of “uncontroversial, small to medium sizes losses” and improve the experience for policyholders.

The single claims procedure would be available for use where the claim is valued at £250,000 or below, with some exceptions, according to Insurance Day. For example, the clause as drafted would allow the lead insurer to override the clause in limited circumstances where the claim is particularly complex and is likely to lead to disputes.

Market participants have been asked to provide their comments on the draft clause by the end of the month.