Amanda Blanc confirms that the insurance industry has ‘some work to do’ in order to bounce back from the reputational onslaught resulting from the FCA’s test case on business interruption wordings

Aviva’s UK chief executive for general insurance Colm Holmes confirmed today that despite the fact “95% of Aviva’s policies do not cover pandemics”, the insurer is still having to pay out for Covid-19-related business interruption (BI) claims that have been insured using wordings written by brokers.

He told Insurance Times: “From Aviva’s perspective, I think we were very clear from the outset: 95% of Aviva’s policies do not cover pandemics.

“From our perspective, it was a reasonably straightforward process. But there is a portion of our policies that were written under broker wordings that were impacted and some of those policies, we’ve actually paid claims on. Others will be subject to determination as part of the FCA case. Even though we’re not a party to that case, the results will impact on some of those policies, those broker wordings.”

The High Court test case between the FCA and eight insurers, designed to clarify business interruption policy wordings in relation to the coronavirus outbreak, concluded at the end of July after an eight-day hearing. The two presiding judges plan to publish their verdict in mid-September.

Holmes continued: “I very much welcome the FCA case because we want to bring clarity to the position from our customers’ perspective. But from Aviva’s view on this, we’ve very much wanted to work with our broker partners, our buying partners and our customers and we’ve continued to do that and support them outside of the four corners of the policy as we go through Covid-19.

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“With regards to business interruption itself, our position on our own policies is clear and under broker policies I just look forward to bringing clarity once we get the results of the FCA case in September.”

The potential fallout following the legal action has led Aviva to estimate an £165m Covid-19-related impact on claims costs, which takes into account a range of scenarios, added Jason Windsor, Aviva’s chief financial officer.

For Holmes, “by far the bulk of that impact is as a result of business interruption claims. We’ve reserved for existing claims that [we have] received, and we are paying claims on business interruption, but also future claims that we expect may come through - a number of those claims will be impacted by the FCA case and we’ll see what the impact of that is obviously when we see the results of that test case in September”.

Reputational damage

Speaking after the publication of Aviva’s 2020 H1 results today, chief executive Amanda Blanc added that the industry-wide reputational damage linked to the FCA’s test case “is a significant issue”.

She said: “If we think about financial services and we think about insurance generally, we know that reputation has never been our strongest point. We know that there is a mistrust of consumers to insurers generally and I always said that this is something as an industry, we must really think very carefully about.

“Unfortunately, over the course of the Covid crisis, we have seen that [reputational] challenge significantly and I think that we have some work to do. I think we need to put a cold towel over our heads and work out how we’re going to come back from that.

“It’s not going to be an insignificant challenge but I think we have to face into it and we have to recognise whether it’s about transparency of our wordings, clarity of the message, the empathy with which we deal with things. These are all things we really, really need to think about.”