Following discussions with the Financial Conduct Authority (FCA) I am delighted that it is to seek legal clarity on whether insurance companies should pay out on policies that appear to cover business interruption caused by notifiable diseases. A number of businesses have had their claims rejected because, whilst their insurance covers business interruption caused by notifiable diseases, the insurance companies say that it was only supposed to provide cover for a local outbreak. However, this condition did not appear in the policy document.
I’ve been contacted by a large number of people both in my constituency and by other MPs who are understandably frustrated that the insurance companies seem to be retrospectively adding conditions to their policies that did not exist when the premiums were paid.
The FCA is making a rapid application to the courts, using a Part 8 procedure, for a judgement about whether insurance companies should pay out on policies. It will include around twelve sample policies in the action. This process normally takes around six months to reach a conclusion but the regulator hopes that the courts will hear this much more quickly due to the acute financial difficulties many businesses find themselves in. It is also proposing a series of measures to support both consumers and businesses who hold insurance products and who are facing other issues as a result of coronavirus (Covid-19). The package of measures sets out the FCA’s expectations that insurance firms should consider whether their products still offer value to customers in the current situation and whether they can be doing more for those suffering a financial impact because of coronavirus.
Christopher Woolard, Interim Chief Executive of the FCA, said: ‘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. 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. 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. It is clear that decisive action is appropriate given the severity of the potential consequences for customers.”