Insurance

UK’s FCA demands insurers treat business closure claims fairly

Donal O’Donovan and Carolyn Cohn

Insurers that do not treat customers fairly when calculating payouts for business interruption cover due to the coronavirus crisis will face action by the UK’s markets watchdog.

The UK’s Financial Conduct Authority (FCA) has taken eight insurers to court over business interruption policy wordings, which the insurers say do not cover the pandemic, with a ruling expected in mid-September.

That case will be closely watched here for any read across to four test cases taken by publicans against Irish insurer FBD over its refusal to pay out on hundreds of business interruption policies. The publicans say they were insured against losses while FBD says shutdowns caused by the pandemic fall outside the policies.

The Irish cases will be heard in October, after the UK ruling. FBD has set aside €30m in relation to the claims and court process.

The Central Bank of Ireland, which regulates insurers here, as well as the Minister for Finance Paschal Donohoe, have said insurers should treat customers fairly and should find for the customer if terms of a contract are ambiguous, but has not intervened directly like British authorities have.

In the UK, the FCA said the case before the courts does not address how any resulting claims payments would be calculated.

“We may intervene and take further actions where firms do not appear to be meeting our expectations and treating their customers fairly,” the FCA said in a statement yesterday.

Some insurers were making deductions for government loans – which businesses had received as pandemic relief – when calculating payouts.

but insurers should not take a one-size-fits-all approach and make uniform deductions.

“Insurers are likely to need to consider individually the precise details of the policy, the claim and the use and application of the government support the policyholder received,” the FCA said.

Similar wordings to those in the test case were used by more than 60 insurers and could affect 370,000 policyholders, the FCA has said.

Insurers are already paying claims on some business interruption policies. The Association of British Insurers said its members expected to pay £900m (€1bn) in such claims this year due to the pandemic.

Analysts said a win for the FCA could increase those payments to billions of pounds.

Additional reporting Reuters

Irish Independent

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