The UK’s regulator has increased the pressure on insurers with a warning it will be paying close attention to how they handle claims from SMEs
Interim CEO of the Financial Conduct Authority, Chris Woolard (pic) wrote to insurers to warn that the regulator would be looking at underwriters’ approach to claims settlement for claims arising from the impact of the COVID-19 pandemic.
He added that it was keen to see underwriters look to make interim payments and if not understand why they have not done so.
“Over the past few weeks, we have seen significant efforts being made by the insurance sector to deal with the impact of the coronavirus pandemic,” he told insurers. “For example, it has carried out important work to deal with customers’ queries at a time when the number has increased exponentially. In such unprecedented circumstances, the FCA’s approach is to be pragmatic wherever we can to assist banks to help their customers and to engage extensively and constructively with them and their representative bodies.”
The letter added that it would be seeking information from insurers in their approach to the payment of claims for small businesses which have been hit hardest by the economic impact of the pandemic.
Addressing coverage disputes with business that have an annual turnover below £6.5 million and fewer than 50 employees, the regulator stressed it would like to see them settled by the Financial Ombudsman Service, rather than adding the time and expense of going through the courts.
“This can offer the prospect of faster decisions than a court process and, where appropriate, more timely payments that help firms recover from the impact of the Covid-19 pandemic,” Mr Woolard explained.
He added that the FCA was not prepared to involve itself with the talk around the need for business interruption clauses to be reviewed. It recognised that the majority of BI policies did not provide pandemic cover.
“While this may be disappointing for the policyholder, we see no reasonable grounds to intervene in such circumstances,” Woolard said.
However, is said they expected that “that claims are assessed and settled quickly”, if they are valid within the policy.
“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,” Mr Woolard explained.
He added that the regulator was keen to see interim payments made by insurers if the claims was valid in an effort to ease the pressure on businesses.
“If there are reasonable grounds to pay part of a claim, but not to make payment of such claims in full, we would you are your board to adopt an approach of making an interim payment. Many firms are 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. Your firm’s decision is likely to help inform our assessment of its culture.”