Regulator tells insurers to assess and settle claims quickly
Insurers have been told to assess and settle insurance claims quickly and not exacerbate the financial pressures on policy holders.
The Financial Conduct Authority (FCA) has written to the chief executives of insurance firms outlying its expectations and informing them they will be expected to explain their reasons if they do not act in accordance with them.
The letter, signed by FCA interim chief executive Christopher Woolard, said: "Where it is clear that the firm has an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly. A key objective of the FCA is to ensure that financial pressures on policyholders are not exacerbated by slow payment, rather, such claims should be paid as soon as is possible.
"This is consistent with the wider objective of the authorities to support business and consumers during the current crisis. If there are reasonable grounds to pay part of a claim but not to make the payment of such claims in full, we would like you and your board to adopt an approach of making an interim payment.
"Many firms are already doing this. If you disagree with doing so, we would like you to send to us the grounds for reaching that decision including how you believe it represents a fair outcome for customers. Your firm's decision is likely to help inform our assessment of its culture."
The FCA had earlier told insurers it expected them to carefully consider the needs of their consumers and show flexibility in their treatment of them.
However, its early conversations with the industry have led it to estimate that most policies have basic business interruption cover that does not cover pandemics. In these instances the regulatory body said it would "see no reasonable grounds to intervene" on behalf of the policy holder.
Earlier this week hospitality operators told The Caterer insurers were turning down requests or leaving them in limbo.
Kate Nicholls, chief executive of UKHospitality, told The Caterer: "We have heard increasing reports of insurers not paying out on policies, largely due to Covid-19 not having been a stated part of policy coverage.
"It raises the question: if there is no flexibility around extraordinary, unforeseeable events, what is the incentive for businesses to pay insurance companies rather than self-insuring and having absolute confidence of a pay out?"