"There remain a number of policies where it is clear that the firm has an obligation to pay out on a policy."
The FCA is seeking legal clarity on business interruption (BI) insurance to resolve doubt for businesses who are facing uncertainty on their claims.
The FCA intends to seek a court declaration, "on an agreed and urgent basis", to resolve uncertainty for many customers making BI claims, and the basis on which firms are making decisions to accept claims.
It is writing to a small number of firms seeking clarification about whether they are declining, or intend to decline BI claims. The FCA expects these firms to reply to it to clarify their position by no later than 15 May 2020. Based on the information obtained, the FCA will consider which firms to ask to join the court process.
The regulator is also proposing a series of measures to support both consumers and businesses who hold insurance products and who are facing other issues as a result of coronavirus.
These measures aim to ensure products continue to offer value and are appropriate for customers taking into account the impact of coronavirus.
It is also designed to help individual customers who may be finding it difficult to pay their insurance premiums or meet their premium finance payments as a result of Covid-19.
In a statement today, the FCA said it expects insurers to assess the value of their insurance products to customers during this period and to consider appropriate action. This might include changing how benefits are delivered, refunding some premiums or suspending monthly payments for a certain period of time.
The FCA also wants insurers to help customers alleviate temporary financial distress and maintain insurance cover that meets their demands and needs. This might include giving customers premium payment holidays, waiving administration and cancelation fees, relaxing charges or interest incurred for missed payment, extending cooling off periods and partly refunding premium payments where the whole amount has been paid up front.
Christopher Woolard, interim chief executive of the FCA, said: "We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency. However, there remain a number of policies 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. There are also some other policies where firms may consider there is no doubt about wording and decline to pay a claim, but customers may still consider there is genuine uncertainty about whether their policy provides cover.
"Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers. It is clear that decisive action is appropriate given the severity of the potential consequences for customers.
"In addition to this court action, the current emergency has altered the value of some insurance products and we believe that insurers should be looking at both whether their products still offer value. Firms should also look at how they can help customers who may be experiencing financial difficulties as a result of the virus. Many insurers are already taking some kind of action to assist their customers and we want to see a degree of consistency for consumers. Today’s proposed guidance and statement aims to make our expectations clear to all firms in the insurance market and provide future certainty."