The coronavirus pandemic has hit businesses hard and many have looked to business interruption policies for assistance. In response many insurers have resisted claims arguing that the policy wordings simply don’t cover the losses and could never have been meant to offer coverage for pandemic related losses, especially on this scale.
It will have come as welcome news to policy holders then last month when the FCA announced that it intended to seek legal clarity on business interruption insurance, via a legal test case, to resolve doubt for businesses facing uncertainty on their claims.
Christopher Woolard, Interim Chief Executive at the FCA confirmed:
"Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers. It is clear that decisive action is appropriate given the severity of the potential consequences for customers."
This month the FCA has confirmed that it has approached 56 insurers and reviewed over 500 relevant policies from 40 insurers. This has resulted in a sample of 17 policy wordings that capture the majority of the key issues that could be in dispute.
The proposed representative sample of policy wordings will include examples of disease clauses, denial of access clauses and trends clauses as well as definition wordings for "notifiable human disease" and "insured damage" among others.
The FCA's recent press release confirms that it will aim to put forward policyholders’ arguments to their best advantage in the public interest and it is now asking all insurers to check their policy wordings against those to be tested to see if theirs will be impacted by the outcome of the case.
The outcome of the case is unlikely to be known for some weeks. The FCA estimates that the case could be heard at a 5-10 day hearing in the second half of July.
As well as seeking to resolve the uncertainty surrounding certain policy clauses, Mr Woolard confirmed that the FCA is alive to the fact that the current crisis has altered the value of some insurance products. The FCA has taken the position that insurers should be looking at whether their products still offer value and how they can help customers experiencing financial difficulties as a result of the virus.
The FCA has confirmed it expects insurers to assess the value of their insurance products to customers during this period and to consider appropriate action. This might, the FCA has said, include changing how benefits are delivered, refunding some premiums or suspending monthly payments for a certain period of time. Insurers are to be given up to six months to assess this in order to take into account the effects of coronavirus in a more rounded manner.
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