Business Interruption Insurance – Instruction Received!

Business Interruption Insurance – Instruction Received!

The fast tracked Supreme Court judgment on the Business Interruption test cases will be welcomed by policyholders, brokers and insurers alike. However, the instructions set out in the FCA letter dated 22 Jan 2021 provide quite a challenge for our colleagues in claims operations.  Nonetheless, we must respond positively to the Supreme Court and the FCA with actions to address the impact on reputation to the industry and the financial hardship to customers that this unprecedented situation has caused.

As an organisation focused on providing independent and expert oversight of claims performance, we asked ourselves what would we be looking for if asked to assess a claims operation’s compliance with the FCA’s instructions?  So, from a first pass of the FCA letter – without guarantee of completeness and with the declarations still awaited from the Supreme Court – here are points we would look to test:

  • How soon after the judgment was contact made with those policyholders whose claims were previously rejected or not fully paid, to advise them of the judgment and that their claim was due to be reviewed?
  • Were all interactions with the policyholder “pragmatic, transparent and consistent”?
  • Were all claims reassessed and settled quickly?
  • Were interim payments issued where further activity is required to calculate the final settlement amount?
  • Were settlements assessed in line with the judgment for each of the policy wordings?
  • Was the period of 17th June to the date of the judgment excluded when applying any time limit imposed in the policy conditions for notifying claims?
  • For affected claims which were settled prior to the judgment, have the policyholders been informed about the test case and its implications?
  • Was that information “clear, fair and not misleading” and did it inform the policyholder what their claim might have been worth if they had waited for the judgment? If not, have those claims been revisited to make residual payments?
  • Where a policyholder has received government support and the insurer has previously made a deduction from their settlement to reflect the level of government support, has that position now been reviewed?
  • If there were any complaints previously dealt with on the affected claims which were not fully upheld, have they now been reviewed and the judgment of the test cases applied?
  • For any on-going litigated cases, has the FCA specific guidance been followed relating to the approach to that litigation and how to treat the costs?
  • For BI claims on policies outside the scope of the test cases, have the test case judgments been used as guidance for interpreting such policies where possible/applicable?

I know most claims colleagues will be on top of this, after all there is nothing too surprising about the letter. Perhaps the above could serve as a useful checklist for claims managers assessing their teams’ and TPAs’ performance in the coming weeks and months.

As ever, we are here to help if we can.

Jan 2021