FCA vows to take action against insurers falling short on business interruption claims
The UK’s financial watchdog has warned insurers are falling short of its requirements in their handling of business interruption (BI) claims.
The Financial Conduct Authority (FCA) said it will “consider using all regulatory tools” it has available to ensure insurers meet its standards after a review carried out by the watchdog determined insurers have “fallen short” in their handling of BI insurance policies.
The watchdog’s warning comes after the UK’s Supreme Court in January ruled insurers must pay out on BI claims made by businesses forced to close during Covid-19.
Insurers have paid out more than £1.2bn to 34,506 businesses over pandemic-related BI claims, FCA data shows.
The regulator’s review found that insurers had fallen short of the FCA’s standards, particularly through their failures to pay policyholders within a “reasonable time frame”.
“As consumers across the country – both SMEs and retail customers – are affected by inflationary pressures and the rising cost of living, it is critical that firms are handling claims promptly and fairly,” the FCA said.
The financial watchdog said policyholders faced delays in receiving payouts due to insurers’ failures in processing and handling claims.
It warned that some insurers lacked the proper processes needed to ensure claims were processed promptly and fairly, as it said insurers also placed “overly burdensome” requirements on small and medium enterprises (SMEs) in their requests for financial information.
Sheldon Mills, the FCA’s executive director of consumers and competition, said: “Today’s report is clear that, while we have observed good practice, there are lessons to be learned for the handling of all claims.”
CMS lawyer Sarah Brooke said: “Insurers would be wise to take on board this feedback, regardless of whether they are involved in the fall out of the BI test case.”