The Economic Secretary to the Treasury has written to the Director General of the Association of British Insurers (ABI), Huw Evans, after ABI members confirmed they will not make deductions from business interruption insurance claims payments to account for government grant funds.
John Glen welcomed the commitment to omit the Coronavirus Small Business Grant Fund, the Retail, Hospitality and Leisure Grant Fund, and the Local Authority Discretionary Grant Fund from claims calculations.
“These insurers are ensuring small businesses retain the support that they need to navigate this crisis, protect jobs and help our economy bounce back,” Glen wrote. “I am grateful for the work of the ABI on this matter.”
According to Glen, it is the UK Government’s expectation that grant funds intended to provide emergency support to businesses during the pandemic are not to be deducted from business interruption insurance claims.
“The principle of these grants is to provide emergency support and help businesses survive,” he said.
“The practice of making these deductions would mean that taxpayer funds are being channelled into savings for insurers, rather than supporting businesses to ride out the disruption brought on by this pandemic.
However, Glen noted that not all insurers have signed up to this approach, even though he says deductions are quite clearly not in line with the intention of the support schemes.
“I strongly encourage those insurers who are making these deductions to follow this example, to respect the spirit of these government support schemes, and to consider the difficulties being faced by businesses during this time,” Glen added.
UK regulator the Financial Conduct Authority (FCA) has also recently written to insurers asking that they consider the appropriateness of any deductions in the context of individual insurance policies, and provided clarification on how government support should be treated in claim calculations.
“I am sure most firms will now abide by the intention of these support schemes. Nevertheless, if grant deductions continue to be made, the Government will consider further action to protect the financial support being issued to businesses,” Glen warned.
