Insurers limit use of reservation of rights

Leading insurers are supporting an AIRMIC initiative to limit the potential use of ‘reservation of rights’, a device that puts the policyholder on notice that the insurer may not accept liability for a particular claim. The move follows complaints from risk managers that some insurers are using the tactic routinely for large claims, regardless of the particular merits of the case.

Under a voluntary agreement being negotiated with its insurer-partners, AIRMIC is pressing for a 90-day agreed timeframe between a claim being notified and any reservation of rights. This would enable direct discussions to take place with a view to resolving the claim amicably without recourse to legal action and the associated costs.

All seven insurers in AIRMIC’s partnership and other insurers in the market have supported the concept in principle, and are working with AIRMIC on the detailed wording of the agreement, which is expected to be complete by the end of the summer.

‘The devil, inevitably, is in the detail. We have to make sure that the agreement provides a workable framework and gives insurers and risk managers the necessary legal protection,’ said Ron Hayes of JLT, who is co-ordinating the negotiations. ‘This is taking time, but everyone supports what we’re doing.’

‘This agreement will be a big step forward and reduce both the expense and time involved in settling large claims,’ said AIRMIC chief executive John Hurrell. ‘We have no objection to insurers reserving rights when there’s a good reason for it, but our members are telling us that it has become a knee-jerk reaction for some insurers. Only the lawyers benefit.’

‘Amicable dialogue is always the way to go.’ said Tom White at Zurich Global Corporate. ‘We all recognise that there are practical issues needing to be addressed but provided everyone’s legal rights are protected, then we fully support this AIRMIC initiative.’

“We wholeheartedly support the principle of this AIRMIC initiative provided the wording of the Agreement protects everyone’s legal rights.

Steve Agutter at AIG UK Ltd

‘We wholeheartedly support the principle of this AIRMIC initiative provided the wording of the Agreement protects everyone’s legal rights,’ said Steve Agutter at AIG UK Ltd. ‘Policyholders and insurers will all gain from anything that streamlines the claims process.’

‘We support anything that facilitates the resolution of claims in an

amicable manner, and we're therefore very happy to work with AIRMIC to limit the use of reservation of rights to a minimum,’ said David Geer of Royal & SunAlliance.

Once the final wording has been agreed it will be posted on the members’ section of the AIRMIC website. A survey carried out this month found that many AIRMIC members believe that reservation of rights is on the increase, with 19% saying they had experience of it being used inappropriately in the past two years.

AIRMIC’s insurer-partners are ACE, AIG, Allianz, AXA, Royal & SunAlliance, XL, Zurich. The brokers HSBC, Lockton, Marsh and Willis and the loss adjusters Crawford are also partners.