The Financial Conduct Authority (FCA) has announced its intention to seek legal clarity on business interruption insurance in order to “resolve doubt for businesses who are facing uncertainty on their claims”.
The measures will set out its expectations that insurance firms must consider whether their products still offer value to customers during the pandemic, and whether they “can be doing more for those suffering a financial impact because of coronavirus”.
The FCA has also published a separate statement that outlines its intention to seek a court declaration, on an agreed and urgent basis, to resolve uncertainty for many customers making BI claims, and the basis on which firms are making decisions to accept claims.
It is seeking to bring to court key relevant cases which provide the “greatest clarity” on specific policy clauses in order to get an independent view on these disputed BI insurance policies if there remains unresolved uncertainty.
The cases placed before the court will be “carefully chosen as a representative sample of the most frequently used policy wordings that are giving rise to uncertainty”.
The FCA will seek to put cases before the court on an agreed basis with the insurers concerned “in order to get the fastest possible judgement”.
It is now writing to a small number of firms seeking clarification about whether they are declining, or intend to decline BI claims. Based on the information obtained, the FCA will consider which firms to ask to join the court process.
Christopher Woolard, interim CEO 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.
“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.”
He added: “In addition to this court action, the current emergency has altered the value of some insurance products and we believe that insurers should be looking at both whether their products still offer value.
“Firms should also look at how they can help customers who may be experiencing financial difficulties as a result of the virus. Many insurers are already taking some kind of action to assist their customers and we want to see a degree of consistency for consumers.”