In response to concerns expressed about how insurers are calculation non-damage business interruption (BI) claims payments where liability has been agreed, the Financial Conduct Authority (FCA) has published a statement on deductions being made for Government support received.  Over the past few months many BI claimants have received some form of Government support in response to the coronavirus (COVID-19) outbreak.  When assessing claims liability, some insurers have been making deductions for Government support received by claimants.

The FCA statement reminds firms that where liability has been accepted they should continue to handle policyholders’ claims fairly and promptly and treat customers fairly (in accordance with Principle 6 of the FCA’s Principles for Businesses). Whether or not and the extent to which Government support is deducted should therefore be assessed on a case-by-case basis. Each assessment should consider the exact type and nature of support, how it was used by the policyholder and the type of policy and terms, including the methodology for calculating the value of claims. Even when it is appropriate to deduct sums received from Government support, a single, uniform approach is unlikely to be suitable. How such sums are treated for tax may differ from how it is treated for calculating loss under a policy.

The FCA states that it may intervene and take further action where firms do not treat customers fairly.