On 15 April 2020, the Financial Conduct Authority (FCA) published a Dear CEO letter regarding conduct in relation to business interruption insurance for SMEs concerning Covid-19.
In the letter the FCA outlines that insurers and brokers have an essential role to play in supporting their customers who may be unclear whether they have appropriate cover in place. Clear accurate and timely communication is crucial, which the FCA expects firms to deliver.
The FCA estimates that most policies provide basic cover, do not cover pandemics and therefore there would be no obligation to pay out in relation to the Covid-19 pandemic. While this may be disappointing for the policyholder, the FCA see no reasonable grounds to intervene in such circumstances.
In contrast, there are cases where it is clear that the firm has an obligation to pay out on a policy. In relation to these, the FCA states that it is important 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 of insurance claims. This is consistent with the wider objective of the FCA to support business and consumers during the coronavirus crisis. The FCA writes that if there are reasonable grounds to pay part of a claim but not to make the payment of such claims in full, the FCA would like firms to adopt an approach of making an interim payment. Where firms disagree with making a partial payment, the FCA would like firms to send them the grounds for reaching that decision including how the firm believes this approach represents a fair outcome for customers. The letter then states that the firm’s decision “is likely to help inform the FCA’s assessment of its culture”.
Where payments are disputed for small businesses, it is likely to fall within the jurisdiction of the Financial Ombudsman Service who will in due course share details of the approach it will be taking in relation to complaints about business interruption insurance.