Anthony Hilton: Insurers face a huge culture shock with Enterprise Bill rules

Until 150 years ago, people in this country were still imprisoned for non-payment of debts.

Now the law comes down on those who try too vigorously to collect money owing to them. Attitudes have shifted 180 degrees.

The insurance industry has yet to realise that something similar has happened to it.

The century-old legal framework that had governed the relationship between insurance companies and their clients was replaced last year with something more reflective of modern business practice and attitudes.

The environment changed even more this week when the London insurance market dropped its hitherto vigorous objection to a clause in the current Enterprise Bill that will give policyholders the right to sue insurance companies if they are unreasonably late in the payment of claims.

Bruce Hepburn of Mactavish is the UK’s leading expert on the reliability of insurance contracts and a key figure in the behind-the-scenes talks that persuaded the London market it should embrace this change.

But what is not yet appreciated, he says, is that it amounts to a massive cultural shift which will fundamentally change the way insurance is bought and sold and will impose significant new responsibilities on brokers, buyers and sellers.

All are going to have to raise their game. One aspect is that the potential cost to an insurance company if it is found to have mishandled a claim could be vastly greater than its exposure under the originally policy.