The Financial Conduct Authority (FCA) has urged insurers to pay out for business interruption claims arising from Covid-19 when they are able to do so, but Mactavish has warned that they may be unable to comply with the request in the current climate.
FCA interim chief executive officer Christopher Woolard wrote to the heads of UK insurers yesterday and conceded that most basic business interruption policies do not cover pandemics.
Where insurers have a clear obligation to pay out, “it is important that claims are assessed and settled quickly”, Woolard wrote.
“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 possible.”
Woolard also urged insurers to consider making interim payments where there are only reasonable grounds to meet part of a claim.
While “many firms are already doing this”, insures that disagree should explain to the FCA on what grounds they have come to such a decision, and how they believe it “represents a fair outcome for customers. Woolard said: “Your firm’s decision is likely to help inform our assessment of its culture.”
Responding to the letter, commercial insurance procurement and dispute resolution firm Mactavish expressed concern that insurers would be unable to meet the FCA’s request.
Insurers have recently incurred significant losses on their investments, putting pressure on their own cash flows, while their claims departments are not at full capacity due to the lockdown and the absence of staff due to Covid-19.
Mactavish would like to see an independent review process set up to monitor how insurers are dealing with coronavirus-related insurance claims.
Bruce Hepburn, chief executive officer at Mactavish, said: “The impact of coronavirus on businesses is huge, and sadly most did not have insurance policies that covered pandemics so relatively few will be successful if they make a claim.”
“However, with many businesses struggling insurers have a duty to make any legitimate settlements as quickly as possible, but to also respond to clients who have made claims to let them know the outcome and the reasons for this.”
“Insurers should have their feet held to the fire over this and the only way of doing this would be to have a review process set up so that their actions can be monitored properly.”
The FCA set out its expectations for insurers during the coronavirus pandemic last month.