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FCA sets out expectations for insurers following BI test case ruling

21st September 2020 - Author: Charlie Wood

The UK Financial Conduct Authority has described the UK High Court’s recent Business Interruption test case judgment as having brought greater clarity for all parties and urged insurers, irrespective of any possible appeals, to consider the steps they can take to progress and pay any relevant claims.

financial-conduct-authority-logoThe financial regulator brought the case forward in May and it is thought that some 370,000 small businesses will be affected by the outcome of the court case, with analysts estimating that between £3.7 billion and £7.4 billion of claims could be on the line.

Based on the sample of policy wordings presented by the FCA, the court decided that most, but not all, of the disease clauses provide cover for losses connected to COVID-19.

Now, FCA’s Interim-CEO Christopher Woolard has set out a series of expectations for insurers following the ruling, which include taking all reasonable steps to ensure claims are ready to be paid and settled at the earliest possible opportunity after any relevant appeals.

Woolard says insurers should communicate directly and as soon as possible with policyholders who have made claims/complaints potentially affected by the judgment to explain the next steps.

Furthermore, insurers should provide at least an initial update on the implications of the judgment by September 22.

“As you write to your policyholders over the coming week, we expect you to be clear to your policyholders on your next steps,” said Woolard in a letter addressed to CEOs.

“We also expect all insurers to take a pragmatic, transparent and consistent approach to their interactions with policyholders over any remaining evidence that applies to individual claims, rather than these creating additional barriers or delays to paying valid claims.

“This includes evidence for proximity and prevalence for ‘disease’ coverage clauses.”

In the coming weeks, the FCA says it will publish additional information to help policyholders and insurers with the process of providing and assessing appropriate evidence on proximity and prevalence.

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