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Court ruling required

FCA seeks legal clarity on interruption claims

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Businesses remain closed because of the virus (pic: Terry Murden)

Britain’s financial watchdog is pursuing action through the courts to seek legal clarity on the insurance rights of customers who have suffered business interruption connected to the coronavirus.

The Financial Conduct Authority is taking key test cases to court that provide the “greatest clarity” on specific policy clauses that represent those most frequently used by insurers which have been disputed by businesses rejected for a payout.

“We believe the circumstances of the current coronavirus (Covid-19) emergency, and its effect on businesses holding BI policies means that any uncertainty needs to be resolved as quickly as possible.” said the FCA.

It says insurance firms should consider whether their products still offer value to customers in the current situation and whether they can be doing more for those suffering a financial impact because of coronavirus.   

Christopher Woolard, Interim Chief Executive of the FCA, said: “We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency.

“However, there remain a number of policies where it is clear that the firm has an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly.

“There are also some other policies where firms may consider there is no doubt about wording and decline to pay a claim, but customers may still consider there is genuine uncertainty about whether their policy provides cover.

“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. It is clear that decisive action is appropriate given the severity of the potential consequences for customers.

“In addition to this court action, the current emergency has altered the value of some insurance products and we believe that insurers should be looking at both whether their products still offer value.

“Firms should also 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 we want to see a degree of consistency for consumers.

It is now vital that insurers take heed of FCA guidance

– Alison Thewlis, SNP

“Today’s proposed guidance and statement aims to make our expectations clear to all firms in the insurance market and provide future certainty.”

SNP Shadow Chancellor Alison Thewlis, who called last week for the FCA to intervene, said: “At a time when support for businesses is absolutely crucial, many across the UK are struggling to claim insurance coverage that they took out in good faith, making a challenging time even more uncertain.

“The SNP welcome steps the FCA is taking to provide certainty for insurance policyholders about whether they will receive money for the claims they have been made. In the meantime, we will continue to press insurers to treat customers fairly and consider cases compassionately where there is ambiguity over coverage.

“It is now vital that insurers take heed of FCA guidance and assess urgently whether their products are fit for purpose. It cannot be fair that pandemic insurance covers smallpox, a historic threat, but fails to cover the current public health pandemic.”

FCA statement

Insurers feel heat despite paying £1.2bn in Covid claims

FCA ‘must apply pressure on insurance firms’

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