15th Apr 2020 12:47
(Alliance News) - The UK Financial Conduct Authority has written to insurance firms, telling them how it expects them to handle claims by small and medium enterprises against business interruption cover during the Covid-19 pandemic.
In a letter to insurance bosses, the FCA's Interim Chief Executive Chris Woolard warned the watchdog would be carefully scrutinising the industry's treatment of customers.
"Over the past few weeks we have seen significant efforts being made by the insurance sector to deal with the impact of the coronavirus pandemic," Woolard said.
He continued: "For example, it has carried out important work to deal with customers' queries at a time when the number has increased exponentially. In such unprecedented circumstances, the FCA's approach is to be pragmatic wherever we can to assist banks to help their customers and to engage extensively and constructively with them and their representative bodies."
The regulator stressed the importance of "clear, accurate and timely communication".
The FCA said most business interruption policies did not cover pandemics, so have no obligation to pay out in relation to Covid-19. "While this may be disappointing for the policyholder we see no reasonable grounds to intervene in such circumstances," Woolard said.
The FCA noted it is collecting information from insurance firms in order to assess how they are interpreting policies.
Where policies clearly do have an obligation to payout, the watchdog warned insurance companies how important it is "that claims are assessed and settled quickly".
"A key objective of the FCA is to ensure that financial pressures on policyholders are not exacerbated by slow payment, rather, such claims should be paid as soon as is possible. This is consistent with the wider objective of the authorities to support business and consumers during the current crisis," Woolard added.
The FCA would like to see insurance companies making interim payments if there are reasonable grounds to pay part of a claim but not to make the payment of such claims in full.
Woolard added: "If you disagree with doing so, we would like you to send to us the grounds for reaching that decision including how you believe it represents a fair outcome for customers. Your firm's decision is likely to help inform our assessment of its culture."
If a policyholder is a small business - with annual revenue below GBP6.5 million and fewer than 50 employees - the FCA recommended solving disputes with the Financial Ombudsman Service, instead of taking the decision to court.
"This can offer the prospect of faster decisions (on claims of up to GBP355,000) than a court process and, where appropriate, more timely payments that help firms recover from the impact of the Covid-19 pandemic," Woolard said.
To aid this process, the FCA has created a new small business unit.
Hiscox Ltd is one of the business insurance providers under scrutiny, PA reported. The Hiscox Action Group, set up by a group of brokers and loss adjusters, is looking at whether or not they have a case to take legal action for Hiscox's alleged refusal "to pay for legitimate business interruption claims".
Hiscox shares were down 17% at 696.41 pence, the worst performer in the FTSE 250 on Wednesday.
By Paul McGowan; [email protected]
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