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Insurers ‘must pay out’ FCA warns
Writing to insurance firms this week, after it set out its expectations for the industry on 19 March, the FCA made clear insurers have an essential role to play in supporting their customers during the coronavirus lockdown.
FCA establishes small business unit
Of a new small business unit established by the FCA, interim CEO Christopher Woolard said: “From today (15 April), the FCA has established a new small business unit, headed by one of our senior leadership team, Andrew Wigston.
“It will be overseen jointly by Jonathan Davidson (executive director of supervision – retail and authorisation) and Sheldon Mills (interim executive director of strategy and competition).
“This unit will co-ordinate the activities of the FCA across small business issues, in terms of ensuring regulated firms are supported through the challenges posed by the current crisis, gathering intelligence about the treatment of small businesses by financial services firms during the crisis and ensuring a co-ordinated response by the FCA to any issues identified.
“We will also continue to co-ordinate closely with the financial ombudsman service.”
Customers unclear about whether they have appropriate cover in place or not must be supported, while clear, accurate and timely communication is essential and must be delivered by insurance firms, FCA interim CEO Christopher Woolard said in a letter to the sector.
He wrote: “Based on our conversations with the industry to date, our estimate is that most policies have basic cover, [and] do not cover pandemics and, therefore, would have no obligation to pay out in relation to the Covid-19 pandemic.”
Disappointing for policy holder
Woolard concluded: “While this may be disappointing for the policyholder we see no reasonable grounds to intervene in such circumstances.”
In contrast, he added, in policies where it is clear the insurer has an obligation to pay out, claims must be assessed and settled quickly.
“This is consistent with the wider objective of the authorities to support business and consumers during the current crisis.
“If there are reasonable grounds to pay part of a claim but not to make the payment of such claims in full, we would like you and your board to adopt an approach of making an interim payment.
“Many firms are already doing this. If you disagree with doing so, we would like you to send to us the grounds for reaching that decision including how you believe it represents a fair outcome for customers.”
May be disputed
However, Woolard acknowledged that some policies may not be clear cut. He explained: “Payment of some policies may be disputed.
“Where a policyholder is a small business with an annual turnover below £6.5m and fewer than 50 employees or an annual balance sheet below £5m, it is likely to fall within the jurisdiction of the Financial Ombudsman Service.
“This can offer the prospect of faster decisions (on claims of up to £355,000) than a court process and, where appropriate, more timely payments that help firms recover from the impact of the Covid-19 pandemic.”
The financial ombudsman would be sharing details about such circumstances and how they will be approached.
