Furthermore, the regulator recognises the ‘key role that insurance brokers and other insurance intermediaries’ play to ensure policyholders’ claims are progressed

On 22 January, FCA executive director Sheldon Mills issued a ‘Dear CEO’ letter, laying down the gauntlet that where “insurers are not meeting the expectations set out” around paying valid business interruption (BI) claims, “we will use the full range of our regulatory tools and powers to ensure they do so”.

The letter follows the Supreme Court’s ruling on 15 January, which maintained the FCA and Hiscox Action Group’s appeals from the High Court BI test case, while all insurers’ appeals were dismissed.

The recently published ‘Dear CEO’ letter outlines the FCA’s expectations around “next steps” and flags how insurance firms should reassess claims that may be affected by the Supreme Court judgment.

Praising the co-operation and speed of the test case process, Mills said that the regulator expects insurers “to maintain this pace and ensure that all businesses with valid BI claims receive the payments due to them as soon as possible”.

He continued: “We believe the court judgments in the test case give all insurers the clarity they need to now conclude their claims processes with the large majority of their BI customers.

“We encourage all insurers to do so as quickly as possible. In some cases, the judgment will mean that previously rejected claims (and complaints) are now valid or that the value of customers’ valid claims will have changed.

“We expect you to be clear on these points and on your next steps as you write to all your policyholders with affected claims or complaints over the coming week.

“It is essential that insurers reassess and settle claims quickly in the light of the Supreme Court judgment, including making interim payments on policies where the claim has been accepted (either in full or in part), but elements of the calculation or agreement on the final settlement remain outstanding.

“This is consistent with the wider objectives of the FCA to support business and consumers during the current coronavirus situation.”

Where insurers “are not meeting the expectations set out here, we will use the full range of our regulatory tools and powers to ensure they do so”, Mills additionally warned.

Broker intervention

The ‘Dear CEO’ letter also recognised the role of the broker in the claims process.

Mills wrote: “We also note the key role that insurance brokers and other insurance intermediaries have in working with insurers to ensure that policyholders’ valid claims are progressed as quickly as possible.

“Our objective remains to ensure that slow payment does not continue to exacerbate financial pressures on policyholders.”

The letter further addressed how insurers should approach the claims handling process, considerations around government support and how this impacts claims, reassessing complaints, communications with policyholders and guidance around any additional legal proceedings.

It also outlined how the Supreme Court judgment could be applied to other lines of business that have been affected by the Covid-19 pandemic, for example wedding or landlord insurance, and how decisions around wording definitions and the original Orient Express v Generali ruling could impact other claims.

Furthermore, the regulator indicated that it would also be doing data collection around the BI policies that have been affected by the test case rulings.

Mills said: “We will shortly send out a new data request for updated details of all BI policies that respond to the Covid-19 pandemic following the Supreme Court judgment, replacing the need for insurers to update the information provided to us under Chapter 5 of our Guidance.

“Additionally, we will request information from all affected insurers regularly on the progress of their non-damage BI claims. The data we will request includes total numbers and values of non-damage BI claims received, numbers and value of initial/interim payments, number of final settlement offers made and the total value of settlements made and reserves.

“It will also include numbers of Covid-19 BI claims related complaints received, resolved and outstanding. Our intention is to publish some of these data.”