The International Underwriting Association has published two new London Market model clauses to help insurers, brokers and clients deal with claims preparation costs.

The IUA’s new clauses aim to provide greater clarity and certainty about the nature and extent of payments that can be considered for payment to policyholders for expenses incurred in preparing and presenting a claim.

Two different versions of a claims preparation costs extension have been issued (IUA 09 091 and IUA 09 092). One imposes fewer requirements on a client and does not require prior written consent from an insurer before services are commissioned. A second model clause requires a breakdown of proposed costs to be submitted in advance of any expenditure being undertaken.

Tom Hughes, senior market services executive and at the IUA, said: “Claims preparation costs can be an important policy benefit, covering the fees charged by qualified professionals to produce and certify evidence in support of a claim. This can enable a more efficient claims process, allowing policyholders to focus on running and recovering their business.

“For clauses to operate well they must contain explicit parameters about the types of costs covered. The IUA’s model extensions seek to achieve this by encouraging a greater provision of information and allowing for a limit of costs to be agreed between the parties involved in a contract.”

IUA members had previously reported that a wide variety of different claims preparation clauses were employed and that reporting of such expenses has sometimes lacked detail.

The new clauses, which were developed by members of the association’s Clauses Committee, are now freely available to be used as published or amended by market participants.


Image courtesy: Zurich Insurance Group

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