The Financial Conduct Authority’s (FCA) efforts to obtain legal clarity on business interruption (BI) policies connected to the COVID-19 pandemic will provide a “clear line” to resolve which claims are valid and which aren’t, according to Interim CEO Chris Woolard.
Speaking as part of the Inside FCA Podcast, Woolard argued that it is “incredibly important” for both policyholders and insurers to have resolution on this issue.
The FCA’s action is also expected to “shorten the timetable for that period of uncertainty” he said, adding that the Authority hoped to bring the issue to court in July.
His comments come shortly after the UK regulator said that it had identified a sample of BI policy wordings that are representative of the key arguable issues.
This followed an announcement on May 1st, in which the FCA said that it would seek to obtain a court declaration to resolve contractual uncertainty around BI coverage.
It has since approached 56 insurers and reviewed over 500 relevant policies from 40 insurers, identifying 17 policy wordings that capture the majority of key issues that could be in dispute.
Next, the FCA plans to move ahead by inviting insurers to help take this representative sample of cases to court, putting forward policyholders’ arguments to their best advantage in the public interest.
At present, it is the regulator’s belief that most SME insurance policies are focused on property damage so in the majority of cases insurers are not obliged to pay out in relation to the coronavirus pandemic.
Commenting on the importance of this issue, Woolard noted that while some BI policies are paying out for virus related issues, others remain “within dispute” due to ambiguities in their wordings.
“Obviously those disputes matter incredibly to the policyholders but obviously the insurers also have the right to defend their own wording,” the FCA CEO said.
“And classically, I think if you were to look at a dispute between a policyholder and someone who’s insured, we can see those play out within court but they often take many, many years to happen. So what we’re trying to do here is shorten the timetable for that period of uncertainty,” Woolard continued.
“!hat we’ve announced is that we’ve secured agreement from a sample of insurers whose wording has applicability across quite a lot of the market to come to court with us on a voluntary basis, on an agreed basis. And what we will do is put the facts in front of a judge, hopefully we’ll be able to do that in July and we’ll be able to get a clear set of rulings that tell us which policies are likely to be engaged and therefore need to consider paying out, and which policies are not.”
“So we’ll get a really clear line, hopefully, from this action that helps resolve this for the market and obviously that’s incredibly important for policyholders but its also incredibly important actually for the insurance industry as a whole to get that clarity.”