The Financial Conduct Authority (FCA) is seeking legal clarity on the inability of some insurance customers to obtain compensation for disruption amid the coronavirus crisis.
Businesses were forced to close their doors and furlough staff after the lockdown measures were introduced in March. The vast majority of businesses did not purchase business interruption insurance and is unlikely to cover the current crisis.
The financial watchdog said it intends to resolve uncertainty for customers and insurers in its court action. Interim boss Christopher Woolard said: “It is clear that decisive action is appropriate given the severity of the potential consequences for customers.”
The FCA said the cases it chooses to bring before court “will be carefully chosen as a representative sample of the most frequently used policy wordings that are giving rise to uncertainty.”
FCA’s insurance guidance
The FCA also set out measures to support consumers and businesses that hold insurance products.
The pandemic has “altered the value of some insurance products”. The FCA has asked insurers to look at whether their products still offer value are appropriate for customers. This might include refunding some premiums or suspending monthly payments for a certain period of time.
The watchdog has given insurers up to six months to assess this issue to take into account the impact of coronavirus “in a more rounded manner”.
Woolard has also insisted firms look at how they can help customers who may be experiencing financial difficulties as a result of the virus. The FCA said it expects firms to help customers alleviate temporary financial distress.
Insurers will have a range of options to help customers. This includes giving customers premium payment holidays and waiving administration and cancellation fees.