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FCA makes announcement on business interruption insurance amid coronavirus

FCA makes announcement on business interruption insurance amid coronavirus | Insurance Business UK

FCA makes announcement on business interruption insurance amid coronavirus

The FCA today announced that it will be seeking legal clarity on business interruption (BI) insurance in a bid to resolve the uncertainty faced by many customers making claims, and the basis on which firms are making decisions to accept claims. The regulator will seek to bring to court the key relevant cases which provide the greatest clarity on specific policy clauses as soon as possible to receive an independent view on these disputes.

It outlined that it will be choosing the cases which offer a representative sample of the most frequently used policy wordings which are giving rise to this uncertainty, and will seek to put cases before the court on an agreed basis with the insurers concerned to get the fastest possible judgement. This will not prevent individuals from being able to also access the Financial Ombudsman or the courts if applicable.

The FCA will also be writing to a small number of firms to seek clarity on their BI claims stance and expects these firms to clarify their position by May 15. Based on this information, a decision will be made regarding which firms will be asked to join the court process.

Discussing this announcement, Christopher Woolard, the interim chief executive of the FCA, said that the association is clear that, in the majority of cases, it believes that business interruption insurance was not purchased to cover this crisis, but that there remain some policies where firms must clearly pay out on a policy. In these cases, the claims must be assessed and settled quickly.

“Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers,” Woolard said. “It is clear that decisive action is appropriate given the severity of the potential consequences for customers.”

In response to this announcement, the British Insurance Brokers’ Association (BIBA) said that it welcomes this morning’s statement.

“Our members have serious concerns for their clients and their ability to recover from this situation and we have been working to help members resolve these issues,” BIBA said. “This intervention from the regulator to create certainty for many customers making BI claims, and the basis on which firms are making decisions on claims is a step in the right direction.”

It is the view of BIBA that this action by the FCA will help resolve issues for businesses and it urged the market to engage with this resolution actively.

In addition to the FCA’s search for legal clarity on BI insurance, Woolard outlined that it is the FCA’s expectation that insurance firms should consider the value of their services to their clients at this time, and whether they can do more to help clients who are facing financial difficulty during the pandemic.

To clarify these expectations, the regulator said it is proposing a series of measures to support both consumers and businesses with insurance products who are faced with other issues due to the coronavirus (COVID-19) pandemic and lockdown. These proposals are designed to provide consumers with temporary support in light of the coronavirus and to follow the steps the FCA has taken in other markets including credit cards, overdrafts and personal loans. These measures set out that the FCA expects insurance firms to:

  • Ensure that their products continue to add value and are appropriate for customers, taking into account both the impact of the coronavirus and the firm’s ability to deliver the benefits promised.
  • Assist individual customers who are facing financial difficulties in paying their premiums or premium finance payments as a result of the coronavirus.

The FCA is currently seeking comments on its proposal to help customers in temporary financial distress by May 05, and on those to assess the value of insurance products by May 15. If confirmed, the measures to help customers in temporary financial distress will apply shortly after May 05, while those for value assessments will apply after May 15. After implementation, the FCA will review this guidance in three months to assess developments regarding the pandemic, and may revise this guidance if appropriate.