The Chartered Insurance Institute has urged insurance professionals and government to act now to reduce the need for legal proceedings like the FCA’s business interruption test case in future.
The re/insurance industry is anxiously awaiting a verdict from the UK courts later today about whether insurers will ultimately be liable for BI losses related to the COVID-19 pandemic.
The FCA has said 370,000 small businesses could be affected by the outcome of the court case, potentially with BI claims each in the tens of thousands.
Now, with a verdict imminent, the CII has called for action in three areas, including greater clarity on product wordings.
The industry body says there should be a consensus among professionals about what those terms mean, so that consumers can be reassured that two policies that look the same on paper cover the same risks.
The CII has also underlined the importance of Improved advice processes in order to to help clients understand insurable and non-insurable risks and what they can do about each one.
Lastly, CII would like to see an established approach to pandemics and other systemic risks that clearly sets out the scope of government intervention.
If the government clarifies the risks it is prepared to cover, the CII believes the market can be clear on how it will cover the risks that it is capable of covering.
“As the professional body for insurance, our key concern is to build trust in the profession,” said Sian Fisher, CEO of the Chartered Insurance Institute.
“For this reason, we welcomed the test case when it was launched, as it will create greater certainly around the legal basis of business interruption contracts.
“Although the High Court decision will bring greater certainty to the situation, we must bear in mind that this decision may be subject to appeal.
“Business interruption insurance is a crucial product for many SMEs. It provides for a wide range of risks that could threaten the survival of a business, including fire and flood.
“Looking to the future, insurers, brokers and government must act now to reduce the need for court cases such as this one in future.”
