Britain’s financial watchdog is urgently seeking clarity from the courts over the insurance rights of companies whose business has been disrupted by the Covid-19 pandemic.
The Financial Conduct Authority, which says it still believes most claimants on business interruption policies do not have the right coverage to warrant a payout, is seeking a fast-track court declaration to “resolve uncertainty for many customers making claims”.
The FCA is taking key test cases to court that provide the “greatest clarity” on specific policy clauses that represent those most frequently used by insurers which have been disputed by businesses who have been rejected for a payout.
“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,” said Christopher Woolard, the interim chief executive of the FCA.
“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.”
A group of more than 100 nightclubs, pubs and bars are planning coordinated legal action against the insurer Hiscox over its non-payment of business interruption insurance claims.
Business owners have filed claims to Hiscox and other commercial insurers only to be told their business interruption policies do not cover the pandemic.
The FCA also said on Friday that insurers may have to consider refunding some premiums or suspending monthly payments for customers who are not getting value for money from their policies during the coronavirus shutdown.
For example, boiler cover insurers may not be able to deliver on offering an annual service at this time, and liability insurance may not be temporarily relevant for businesses such as hairdressers, bars and restaurants closed as a result of the government shutdown.
The FCA said it would give insurers failing to deliver on the benefits promised in their policies six months to “take into account effects of coronavirus in a more rounded manner” and consider appropriate action.
The FCA has also said insurance firms must look to help individual customers who are struggling to pay premiums due to the coronavirus crisis.
The regulator, which has issued the same guidance in other markets including credit cards, overdrafts and personal loans, said firms must consider options including premium payment holidays, delaying charges or interest for missed payment and waiving administration and cancellation fees.
