Coronavirus – Business interruption insurance test case: finalised guidance for firms - UK

• United Kingdom

• Insurance and reinsurance
• Litigation and dispute management
• Financial services - Insurance market

18-06-2020

On 17 June 2020, the FCA issued its finalised guidance, together with a feedback statement, following its consultation setting out its expectations for insurers and insurance intermediaries when handling claims and complaints for business interruption policies during the FCA’s test case. (see our earlier briefing).

The guidance came into effect on 17 June 2020. The guidance will be reviewed in light of progress of the test case, and in any event within 6 months, to assess whether it is still needed.

Scope  

The guidance applies to:

• An insurer which, before the date that the test case began, underwrote a relevant non-damage business interruption policy; and
• A managing agent which, before the date that the test case began, performed functions for a member of Lloyd’s in respect of a relevant non-damage business interruption policy.

The guidance under the heading, “Communicating with policyholders generally during the test case” also applies to insurance intermediaries.

Actions

A senior manager should be appointed to oversee all of the expectations on an insurer as set out in the guidance.

Insurers should publish sufficient details with appropriate prominence and signposted to keep all policyholders updated about the test case and the implications for potential claims under policies. This may be published on a website, or by other general means and should be published promptly after 17 June 2020.

Insurers are expected to review their relevant non-damage business interruption policies and report the outcomes of their reviews, in the form to be provided the FCA by 8 July 2020.

Firms are expected to consider what general and individual communications they need to make to their non-damage business interruption policyholders by 15 July 2020.

Comment

The detailed guidance is essential reading for insurers and for those parties involved in the claims process to ensure that steps are put in place in order to meet with the FCA’s expectations. Insurers will have given thought to the cover offered in their policies, and now have 3 weeks to report to the FCA. All parties in the claims process will need to ensure that a collective approach is implemented so that customers receive appropriate information and updates on their claims or complaints. 

Useful links

Business Interruption insurance test case: finalised guidance for firms

Business Interruption insurance test case: feedback on draft guidance

Business Interruption insurance

FCA coronavirus (Covid-19) hub