FCA intends to seek legal clarity to resolve contractual uncertainty around business interruption insurance
Insurance industry bodies have welcomed the decision from the Financial Conduct Authority (FCA) to test the wording of certain BI contracts in court, following disputes regarding claims related to the coronavirus pandemic.
Christopher Woolard, the interim chief executive of the FCA, said claims must be assessed and settled quickly.
"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," Woolard said. "It is clear that decisive action is appropriate given the severity of the potential consequences for customers."
Matt Connell, director of policy and public affairs for the Chartered Insurance Institute (CII), said this approach is preferable to a "disorderly and potentially lengthy series" of test cases, which, he said, are less likely to reach a comprehensive and definitive solution.
"As a result, we welcome this move to reduce uncertainly for both insurers and the public. The process which the FCA will use to select test cases will be very important, and we anticipate that the FCA will consult widely with both consumer groups and the insurance sector to maximise the chances of reaching a decision that is fair, comprehensive and definitive."
BIBA also welcomed the FCA statement. It said: "Our members have serious concerns for their clients and their ability to recover from this situation and we have been working to help members resolve these issues. This intervention from the regulator to create certainty for many customers making BI claims
, and the basis on which firms are making decisions on claims is a step in the right direction."
The FCA has indicated that customers may still access the Financial Ombudsman or the courts if they qualify and wish to do so. The regulatory body also intends to write to a small number of firms to seek clarity on their BI claims approach on 15 May to decide which firms will be asked to join the court process.
"It is our view that this action by the FCA will help to resolve issues for businesses and we urge the market to engage with this resolution activity," said BIBA.
Insurance buyer and claims resolution firm Mactavish said that poor wording in some policies means that a small percentage of claims should be settled. It also argued that the industry has exaggerated the potential size of coronavirus related insurance claims because extensions to policies that cover diseases are often capped at less than 10% of total cover.
Bruce Hepburn, CEO of Mactavish, said: "Some insurers have been too aggressive in refusing some business interruption coronavirus related claims and scored a PR own-goal because there are definitely a small number that should be settled. Even though insurers may feel their policies don't cover this issue, in some cases their poor document wording means they may be liable to pay-out, and greater legal clarity around this would be welcome."
Friday 2 October
Workplace Public Policy Committee
Previously 28 February
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