Insurers should pay damages to claimants when there is an unreasonable delay in paying a valid claim, the British Insurance Law Association (Bila) has said.

Bila released its insurance contract law reform report after 18 months' study by a sub-committee headed by Adrian Hamilton QC.

The Law Commission will consider the report.

Hamilton said similar reforms had already taken place in many European countries, particularly Australia.

"We consider it important that the UK keeps pace with these reforms," he said.

The claims damages are one of four major recommendations in the report.

It also proposed that legislation be introduced to implement the Law Commission's 1980 recommendations on non-disclosure, misrepresentation and breach of warranty.

These recommendations would stop insurers repudiating claims for breach of warranty that is not causative of the loss. They also restrict duty of disclosure to the facts that a "reasonable person" would disclose.

The Bila report recommends statutory provision be made for codes to be issued by the FSA regulating the rights and obligations of insurers and insureds and the conduct of intermediaries in the claims process.

It said these codes should include time limits for claims payments, information that must be provided by insurers on insureds' rights and duties during claim notification, the payment of statutory interest to insureds when claims payments are overdue and provision of alternative dispute resolution.

Finally, the Bila report recommended that insurable interest be based on "insurable relationship" so that economic disadvantage, rather than legal or equitable interest, is the test.