With several businesses filing non-damage business interruption (BI) claims during the COVID-19 pandemic, the Financial Conduct Authority (FCA) has warned UK insurers to continue to handle and assess such claims promptly and fairly in situations where they have accepted liability.
Insurers have also been urged to adhere to ‘Principle 6’ of the FCA handbook which stipulates that firms must pay due regard to the interests of its customers and treat them fairly.

This comes after policyholder complaints, stakeholders and media reports in recent weeks made the UK financial regulator aware of concerns about how insurers are calculating non-damage BI claim payments.

In particular, some insurers are reported to be making deductions for some types of government support those policyholders have received over the past few months.

In an official statement, FCA said that insurers will need to assess the appropriateness of making deductions for some or all of each type of government support received by the policyholder with a case-by-case assessment.

The assessment should consider the exact type and nature of the government support; how the policyholder used this support and the type of policy and its precise terms including any set methodology for calculating the value of a claim set out under the relevant section of the policy.

While some of these factors will be case and claim specific, the regulator pointed out that a single and uniform approach to deductions is still unlikely to be appropriate even where it is appropriate in principle to deduct these amounts.

Thus, insurers are likely to need to consider individually the precise details of the policy, the claim and the use and application of the government support the policyholder received.

“We expect firms to take these matters into account when they calculate non-damage BI claims. We also expect them to reflect these matters appropriately in their communications with policyholders when making settlement offers and reaching settlement on relevant BI claims,” said FCA.

The regulator will also consider how firms treat their policyholders in this way as part of its usual supervisory activities and may intervene as well as take further actions where firms do not appear to be meeting expectations and treating their customers fairly on these points.

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