1st May 2020 10:55
(Alliance News) - The UK financial regulator on Friday said it has chosen to involve the courts in order to resolve contractual uncertainties in business interruption insurance cover.
The Financial Conduct Authority had previously 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 the letter - sent mid-April - to insurance bosses, the FCA's Interim Chief Executive Chris Woolard warned the watchdog would be carefully scrutinising the industry's treatment of customers.
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".
In a statement on Friday, the FCA said it intends to obtain a court declaration to resolve contractual uncertainties, in order to seek greater clarity over business interruption insurance policies.
"We are intending to take this action in the public interest to advance our consumer protection and market integrity objectives. We believe the circumstances of the current coronavirus emergency, and its effect on businesses holding BI policies means that any uncertainty needs to be resolved as quickly as possible," the regulator added.
The FCA said there are "continuing concerns about the lack of clarity and certainty" over business interruption claims.
Interim CEO Christopher Woolard 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".
He continued: "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".
The FCA is also proposing a series of measures to support both consumers and businesses who hold insurance products and who are facing other issues as a result of the coronavirus pandemic.
"The package of measures sets out the FCA's expectations that 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," the watchdog said.
The FCA is seeking to bring to court what it believes are the "key relevant cases" which provide the greatest clarity on specific policy clauses as soon as possible to get an independent view on these disputed BI insurance policies if there remains unresolved uncertainty.
The additional guidance proposals are designed to provide consumers with "temporary support in the light of the exceptional circumstances".
The proposals include: ensuring products continue to offer value and are appropriate for customers taking into account the impact of coronavirus taking into account the firm's ability to deliver the benefits promised. And, the FCA wants insurers to help individual customers who may be finding it difficult to pay their insurance premiums or meet their premium finance payments as a result of coronavirus.
If the proposed measures are confirmed, they will take place on May 5.
By Paul McGowan; [email protected]
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