Insurance companies told to settle claims or explain their decisions
In a letter to the chief executive of insurance companies, FCA interim chief executive Christopher Woolard says that companies should make payments as soon as possible. If they are not going to pay, they should inform the FCA “the grounds for reaching that decision including how you believe it represents a fair outcome for customers”.
“Based on our conversations with the industry to date, our estimate is that most policies have basic cover, do not cover pandemics and therefore would have no obligation to pay out in relation to the Covid-19 pandemic. While this may be disappointing for the policyholder we see no reasonable grounds to intervene in such circumstances,” said Woolward.
“In contrast, there are 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.”
“A key objective of the FCA is to ensure that financial pressures on policyholders are not exacerbated by slow payment, rather, such claims should be paid as soon as is possible. This is consistent with the wider objective of the authorities to support business and consumers during the current crisis.”
If there are reasonable grounds for an insurer to pay part of a claim but not to make the payment of such claims in full, Woolward asks that companies adopt an approach of making an interim payment, adding: “your firm’s decision is likely to help inform our assessment of its culture.”
The move follows complaints from many businesses across different sectors that insurance companies are not paying out on what they believe to be legitimate claims under their business interruption insurance. Many hospitality businesses have told BigHospitality that they are unable to claim as Coronavirus is not mentioned specifically in their insurance documents.
“After hearing the PM say he has spoken to insurance companies and they were going to be ‘cooperative’. I feel their response to us the insured is far less than cooperative,” one restaurateur told BigHospitality.
