Category: Insurance Act 2015 — claims provisions · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed 2026-06-11
The reasonable time to pay a claim is the statutory standard implied into every English-law insurance contract by section 13A of the Insurance Act 2015, requiring the insurer to settle valid claims within a period that is reasonable having regard to all the circumstances of the claim.
Category: Insurance Act 2015 — claims provisions Also known as: reasonable time for payment, reasonable time standard, section 13A reasonableness Related concepts: Section 13A Insurance Act 2015, Late payment damages insurance, Claims handling, Interim payments
The concept of a “reasonable time” within which an insurer must pay a valid claim is the central touchstone of section 13A of the Insurance Act 2015. The Act does not prescribe a fixed period; rather, it defines the standard by reference to the circumstances of each claim. Section 13A(3) provides that what is a reasonable time will depend on all the relevant circumstances, and it lists a non-exhaustive set of factors: the type of insurance, the size and complexity of the claim, compliance with any relevant statutory or regulatory rules or guidance, and factors outside the insurer’s control. The reasonable time expressly includes a reasonable period to investigate and assess the claim, so the clock does not start running from the date of notification but rather extends to permit a proportionate investigation. Section 13A(4) further provides that the insurer does not breach the implied term merely by failing to pay while there is a reasonable dispute about the claim, provided the insurer’s conduct in handling the disputed claim is itself reasonable. The reasonable time standard is therefore a holistic assessment of the insurer’s overall conduct, not a stopwatch test. Courts will ask whether, on the facts and viewed objectively, the insurer’s investigation, decision-making and payment processes were proportionate, prompt and properly resourced. The standard interacts with parallel obligations in the FCA’s Insurance Conduct of Business Sourcebook (ICOBS) and Consumer Duty, which impose qualitative claims-handling duties on regulated firms and which are themselves expressly listed in section 13A(3) as relevant factors.
The statutory framework is contained in Part 4A of the Insurance Act 2015, in particular section 13A, inserted by section 28 of the Enterprise Act 2016 and in force from 4 May 2017. Section 13A(1) implies a term into every contract of insurance that the insurer must pay any sums due in respect of a claim within a reasonable time. Section 13A(2) confirms that a reasonable time includes time to investigate and assess. Section 13A(3) lists the non-exhaustive factors. Section 13A(4) preserves the insurer’s right to dispute a claim without thereby breaching the implied term, provided the insurer’s conduct in respect of the disputed claim is reasonable. Section 13A(5) provides that, if the insurer can show its conduct in respect of the disputed claim was reasonable, it does not breach the implied term merely by failing to pay the claim or the disputed amount.
The reasonable time standard sits alongside, and is informed by, regulatory rules. ICOBS 8.1.1R requires authorised insurers to handle claims promptly and fairly, provide reasonable guidance to help a policyholder make a claim, not unreasonably reject a claim, and settle claims promptly once settlement terms are agreed. The Consumer Duty (PRIN 2A) and rules in PRIN 2A.5 require consumer-facing firms to provide good outcomes throughout the customer journey including claims. The Financial Ombudsman Service applies a “fair and reasonable” test that incorporates these regulatory standards and the Quadra Commodities analysis. The first detailed judicial guidance on the reasonable time standard appears in Quadra Commodities SA v XL Insurance Company SE [2022] EWHC 431 (Comm), where Butcher J considered the question on the facts and dismissed the late payment claim on the basis that the insurer had reasonable grounds to dispute coverage and had handled the claim without unreasonable delay.
In practice, the reasonable time analysis is fact-sensitive and proceeds through several stages. First, the court (or Ombudsman) will identify the relevant timeline of the claim from notification through to payment, mapping each material event: notification, acknowledgement, instruction of loss adjusters or other experts, requests for information, decisions on coverage, interim payments, formal offers and final payment. Second, each period of inactivity or delay is scrutinised against the surrounding circumstances. Third, the insurer’s conduct as a whole is assessed against the section 13A(3) factors.
Factors that typically support a finding of reasonableness include genuine coverage complexity (for example, novel policy wordings, multiple insurers, jurisdictional issues), the volume and difficulty of factual investigation (large business interruption claims, multi-property losses, suspicious circumstances justifying fraud investigation), the policyholder’s own delay in providing information or access, regulatory or reinsurance approval requirements, and the willingness of the insurer to make interim payments where partial liability is admitted. Factors that suggest unreasonableness include unexplained periods of silence, repeated unnecessary requests for the same information, refusal to make interim payments where the loss adjuster recommends them, decisions delayed pending speculative coverage points, failure to engage with the insured’s legal representatives, and conduct that breaches ICOBS or the Consumer Duty.
The reasonable time standard does not have a strict numerical floor. Simple consumer motor or household claims may have a reasonable timeline measured in days or a few weeks; complex commercial property and business interruption claims may legitimately take many months or, in extreme cases, more than a year. A useful working approach for claims teams is to maintain a contemporaneous file note recording the reasons for each material decision, to communicate to the insured the expected timeline and to update it when circumstances change, to make interim payments wherever the adjuster recommends, and to seek early legal advice on disputed coverage so that any dispute can be characterised as bona fide.
In practice the standard differs significantly between lines of business. For motor claims, claims handling is heavily automated and the reasonable time is short, often measured in days for simple own-damage claims and within MIB and untraced drivers’ agreement timetables for third-party claims. For household claims, simple property losses are expected to be settled within weeks unless validation is required. For commercial property and business interruption, the reasonable time is materially longer to permit reinstatement scoping, mid-term audits and the operation of declaration provisions. For liability claims (professional indemnity, public liability, directors and officers), the reasonable time encompasses the entire period of defence and indemnity, with the question of “payment” arising primarily in respect of defence costs and settlement contributions. For marine and energy risks, complex causation investigations and the involvement of multiple coinsurers and reinsurers extend the reasonable timeline considerably.
The reasonable time standard also varies by claimant characteristics. Consumer claimants benefit from the Consumer Duty’s heightened expectations and from the principle that vulnerable customers may require additional support and shorter response times. Commercial claimants are expected to be more sophisticated, but the reasonable time standard is not relaxed merely because the insured is large; if anything, the size of the claim may justify shorter reasonable timelines for interim payments to support cashflow. Where the policy is part of a layered programme, the reasonable time for primary layers is shorter than for excess layers, but the excess insurers are not entitled to wait for full resolution of the primary layer before engaging.
A retailer’s flagship store is destroyed by fire in January. Cover is provided under a combined property and business interruption policy incepted in June. The loss adjuster recommends an interim payment of ÂŁ500,000 within six weeks of notification to enable temporary trading from alternative premises. The insurer declines to make the interim payment, citing a need to investigate stock records, despite the policyholder having provided full audited accounts. Four months in, the insurer has still not made any payment. The retailer issues proceedings under section 13A. The court, applying the reasonable time standard, finds that interim payment of the substantial admitted element was unreasonably delayed from week eight onwards, awards damages comprising the cost of bridging finance and a portion of lost profits attributable to delayed reopening, but also finds that the insurer was entitled to a reasonable period to investigate the disputed stock element of the claim, on which final payment came at month nine without further unreasonableness. The outcome demonstrates that the reasonable time analysis is granular, examining each element of the claim and each period of the timeline separately.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-11. Next review: 2026-12-11.
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