The Financial Conduct Authority (FCA) has today announced it intends to seek legal clarity on business interruption (BI) insurance to resolve doubt for businesses who are facing uncertainty on their claims.
It intends to seek a court declaration, on an urgent and agreed basis, to end uncertainty for many people making BI claims. One of the purposes is to explain the basis on which firms are making decisions to accept or reject claims.
The FCA will bring key relevant cases to court as soon as possible to get an independent view on these disputed BI insurance policies. The chosen cases will provide the greatest clarity on specific policy clauses and will be carefully chosen as a representative sample of the most frequently used policy wordings that are giving rise to uncertainty. The FCA is writing to a small number of firms seeking clarification about whether they are declining, or intend to decline BI claims. The FCA expects these firms to reply to it to clarify their position, by no later than 15 May 2020. Based on the information obtained, the FCA will consider which firms to ask to join the court process.
The FCA will seek to put cases before the Court on an agreed basis with the insurers concerned in order to get the quickest possible judgment. Individuals can still access the Financial Ombudsman or the courts if they qualify and wish to do so.
In addition to this court action, the FCA has proposed measures to support consumers and businesses who are facing other insurance issues as a result of coronavirus (Covid-19). Insurers should be looking at whether their products still offer good value to customers because Covid-19 may be having a temporary impact on the extent to which consumers can use and access benefits from their insurance products. For example, liability insurance may temporarily not be relevant for some businesses such as holiday parks, bars and restaurants that are closed as a result of Government interventions linked to Covid-19.
James Wild MP, said
I am very pleased by this action on insurance claims and premiums. Many businesses in West Norfolk have found themselves continuing to pay high insurance premiums despite having to close their businesss. Having written to Treasury Ministers and the Association of British Insurers about this , I am delighted that the FCA are taking action to rectify a very difficult situation. I hope we can reach a fair outcome for everyone involved.
The FCA expects insurers to assess the value of their insurance products to customers during this period and to consider appropriate action. This might include changing how benefits are delivered, refunding some premiums or suspending monthly payments for a certain period of time. The FCA proposes to give insurers up to six months to assess this so that it can take into account effects of coronavirus in a more rounded manner.
Finally, the FCA has said that insurance firms should look at how they can help customers who may be experiencing financial difficulties as a result of the virus. Many insurers are already taking some kind of action to assist their customers and the FCA want to see a degree of consistency for consumers. Their new guidance and statement aims to make expectations clear to all firms in the insurance market and provide future certainty for the industry and for customers.
Further information
- Customers who are struggling to afford their insurance or premium finance payments as a result of the impact of coronavirus should contact their insurer to discuss options.
- The FCA is seeking comments on its proposal to help customers in temporary financial distress by 5 May and on those to assess the value of insurance products by 15 May. If confirmed, the measures to help customers in temporary financial distress will apply shortly after 5 May and those for value assessments shortly after 15 May. Once implemented the FCA will review this guidance in 3 months in the light of developments regarding coronavirus and may revise the guidance if appropriate.
