21 September 2020

CRE: FCA tells insurers to settle BI claims as quickly as possible

The UK regulator has told insurers to settle Covid-19 business interruption (BI) claims clarified in last week’s High Court judgment “as quickly as possible”, and warned against “creating additional barriers or delays to paying valid claims”.

In a ‘Dear CEO’ letter following the test case ruling, which found many BI policies and wordings covered businesses for losses in the pandemic while others did not, the Financial Conduct Authority (FCA) said insurers should ensure all valid claims clarified by the judgment are processed irrespective of any appeal.

Its letter said the judgment gave clarity on some wordings and those claims should now be settled with policyholders.

But the FCA also warned insurers waiting for further clarity through an appeal, to be clear to policyholders and take “all reasonable steps to ensure that all those claims are ready to be paid and settled at the earliest possible opportunity after any relevant appeals”.

The regulator asked insurers to update policyholders on the implications of the judgment by 22 September.

Chris Woolard, interim chief executive of the FCA, warned insurers face sanctions if they fail to either settle valid claims or progress claims potentially subject to an appeal. “It is critical that this results in insurers paying valid and successful claims in full at the earliest possible date to support business and consumers during the current situation,” Mr Woolard said.

 “Where we see that insurers are not meeting the expectations set out here, we will use the full range of our regulatory tools and powers to ensure they do so,” he added.

The High Court has set a hearing for 2 October, when it will consider any applications for appeal. If granted, appeals will be expedited.

The FCA said: “Our objective remains to ensure that slow payment does not exacerbate financial pressures on policyholders. It is important that insurers reassess and settle claims quickly, including making interim payments wherever possible on policies where the legal process is complete or the claim has been accepted in full or in part.

 “We also expect all insurers to take a pragmatic, transparent and consistent approach to their interactions with policyholders over any remaining evidence that applies to individual claims, rather than these creating additional barriers or delays to paying valid claims,” it added.

The FCA will publish guidance on proximity and prevalence in disease coverage clauses during the next few weeks, in particular where policyholders are asked by their insurers to provide evidence on the proximity and prevalence of Covid-19 in line with policy wordings.

CRE