Paying outstanding BI claims remains one of the chief exec’s ‘personal priorities’ this year, however chairman adds that ‘appropriate pandemic exclusion terms’ are now in place for Hiscox’s BI book

To boost the insurance industry’s reputation following the FCA’s business interruption (BI) insurance test case, insurers have to get “the basics right” and focus on “service, digital interaction and clarity”, said Bronek Masojada, chief executive of Hiscox.

The test case launched by the FCA last year sought clarity around the interpretation of business interruption policy wordings when applied to Covid-linked claims after some insurers rejected their commercial policyholders’ submissions.

The case was heard by the High Court last July and the Supreme Court in November 2020. The judgments mainly sided with the FCA and policyholders, requiring insurers to start paying BI claims in line with the judgments’ findings – according to the FCA’s most recent data, published in July, a total of £875,489,994 has been paid out by insurers for either interim or final BI claims payments across 23,933 claims.

This process dented consumer trust in the insurance sector. According to the FCA’s Financial Lives 2020 survey – published in February 2021 - 22% of UK adults now trust insurance companies less because of the Covid-19 pandemic, while 36% believe the insurance industry did not do enough to help consumers.

To help repair this industry-wide reputational damage, Masojada told Insurance Times that the onus for insurers has to be on delivering the basics well on a “policy by policy, claim by claim” basis.

He explained: “Getting the basics right is what the industry has to do and certainly [that is] what we’ve focused on here at Hiscox.

“What does getting the basics right mean? It means can we continue to build on digital interaction, either direct or through the broker channel; it means clarified policy wordings so it becomes ever clearer what is included and what’s not included; and then finally, designing policies so that claims settlements are quicker and easier.

“So, service, digital interaction and clarity are themes which we have at Hiscox.”

Personal priority

Following the Supreme Court judgment, which was delivered in January 2021, Hiscox has faced into its own backlog of BI claims.

For example, it reached a settlement agreement with the Hiscox Action Group (HAG) in June, as well as secured a £5.2m settlement with specialist broker NDML for 72 claimants working in the nightclubs and live events sector last month.

Masojada said the insurer is making “good progress”.

He explained: “At the end of July, Hiscox had made full and final payments [for] over 2,000 claims – we did as many full and finals in July as we did in the average of May and June, so we’ve continued good progress there.

“We’ve continued to make interim payments – in total, we’ve made almost 4,000 full and final and interim payments. Obviously, if someone is first interim and then full and final, we don’t double count. So, we’ve paid almost 4,000 full and final or interim [payments].

“Clearly, we started a little bit slowly, but we’ve caught up and we’re going to continue maintaining that pressure and it will be one of my personal priorities between now and the end of the year when I hand over as [chief executive].”

New wordings

Within Hiscox’s 2021 half year financial results, published this week, chairman Robert Childs said “the UK business interruption book has now been fully renewed with the appropriate pandemic exclusion terms”, signposting that Hiscox has amended its wordings following the test case action.

On this, Masojada said: “The changes were made in May of last year, so they’re now fully worked through the system.

“In terms of ongoing changes to the small business wording, that’s an ongoing process and that’s an ongoing process because clearly the risks change over time and policy wording has to do that [too].

“What you’ve seen across the industry is the wordings being clarified around whether or not BI responds to a pandemic event and clearly that is available, but obviously as a separate insurance only.

“But I do think in terms of evolution, as the world evolves, business insurance policies have to evolve as well and so I’m sure that later on this year and then again next year and again the year after, there will be changes to the policy and that’s what you would expect from us.”