Lloyd’s recently (6th October) communicated its expectation on how managing agents should treat UK Government grants when calculating business interruption losses for UK policyholders. These emergency grants were introduced in response to unprecedented difficulties and the economic shock facing businesses across the UK. The intent of this financial support is to help vulnerable businesses with their uninsured losses.
John Neal, CEO wrote directly to the CEO’s of managing agents and a statement on Lloyd’s expectation was published on Lloyds.com.
It is Lloyd’s expectation that managing agents will show support for the businesses in receipt of the UK grants by following Lloyd’s stated approach and not deduct these funds from BI claims. The approach we are advocating is also supported by the ABI and endorsed by several of its members, furthermore, it is consistent with the expectations expressed by the UK Government.
This guidance provides further information on the approach Lloyd’s expects.
It should be noted that nothing in this note is intended to provide advice regarding the handling of any specific claim or complaint.
Which grants are in-scope?
The grants in-scope for this approach where paid to eligible businesses include:
- Coronavirus Small Business Grant Fund;
- The Retail, Hospitality and Leisure Grant Fund;
- The Local Authority Discretionary Grant Fund;
- and equivalents in the devolved nations.
Applying the approach
Communicating with policyholders and third-party claims handlers on open claims
We think that early and transparent communication with policyholders regarding how you (or third-party representatives) plan to adjust their claim is important in helping them prepare their claim presentation and understand the process. We do not consider it necessary for managing agents to communicate the approach to these grants as a stand-alone topic to policyholders, except for cases where you may have informed policyholders that these grants will be deducted, in which case you should expedite contact with these policyholders to discuss the approach.
It is also our expectation that managing agents consider taking the same approach to these grants when evaluating claims payments on other policies, where benefits are similar to those of business interruption cover.
You should communicate with third parties handling relevant claims to make them aware of your approach to these grants and provide them with the messages you want conveyed to policyholders on your behalf.
Revisiting closed claims
Where you have previously taken the approach of deducting these grants from claim payments, you should identify and reopen these claims. The claim assessment and payment should be reviewed and if appropriate (a further) claim payment made. In some cases, there may be no additional sum to pay, for example where section sub limit or the stated sum insured has already been reached.
You should where possible, review records of policyholder claims enquiries and withdrawn claims to identify whether these policyholders may have made decisions not to present claims, or not to pursue claims, based on information they received in connection with the deduction of the grants from claims settlements. Where such cases are identified, you should contact these policyholders and explain your revised approach.
Monitoring
The management and oversight of the steps needed to communicate and embed any change in approach should be monitored to ensure that customer service remains at the heart of this exercise. Lloyd’s expects that a plan with performance measures be established, which supports the identification, review and swift progression, of all potentially eligible claims, where the previous notified approach needs to be reassessed.