FCA sets out its expectations of insurers’ approaches to business interruption insurance and SMEs
15th April 2020
The Financial Conduct Authority (FCA) has sent a Dear CEO Letter to insurers about its expectations of their conduct in relation to business interruption insurance and SMEs in the light of the Coronavirus (Covid-19) pandemic. Members may access the Dear CEO Letter by clicking here.
The letter, signed by Christopher Woolard, the Interim CEO of the FCA, recognises the role that insurers and brokers have in supporting customers who may be unclear about whether they have appropriate cover in place as well as the varying approaches that firms may be taking to BI claims arising from the pandemic.
Mr Woolard noted in his letter: ‘Based on our conversations with the industry to date, our estimate is that most policies have basic cover, do not cover pandemic and therefore would have no obligation to pay out in relation to the Covid-19 pandemic. While this may be disappointing for the policyholder we see no reasonable grounds to intervene in such circumstances.’
In contrast, the FCA notes that with BI policies where there is a clear obligation to pay out, it was important that these claims should be assessed and settled quickly. Slow claims payment should not exacerbate financial pressures with policyholders.
In cases that are disputed, the FCA reminds insurers, that certain SMEs may go to the Financial Ombudsman Service (FOS) for resolution of its Covid-19 claim, which can offer the prospect of faster decisions and payouts than through the court process.
The letter also announced that the FCA has set up a new unit dedicated to its activities across small business issues. The small business unit is being headed up by Andrew Wigston, one of the FCA’s senior leadership team, and will be overseen jointly by Jonathan Davidson, Executive Director of Supervision – Retail and Authorisation, and Sheldon Mills, Interim Executive Director of Strategy and Competition. The unit will ensure co-ordination, gather intelligence about the treatment of small businesses by financial services firms and ensure that the FCA gives a co-ordinated response to any issues identified. The unit will co-ordinate closely with the FOS.
BIBA members’ compliance and regulation queries should be directed to: [email protected].