Insurers have been warned to pay up quickly to small businesses affected by the coronavirus pandemic.
The warning comes in a letter sent to businesses including the SME sector yesterday by Christopher Woolard, the interim chief executive of the Financial Conduct Authority (FCA), Britain’s financial regulator.
The letter follows reports in the Sunday Times that a group of small businesses are threatening legal action against insurer Hiscox for refusing claims on policies which supposedly covered the impact of contagious diseases.
On Wednesday, in response, Hiscox said its “core policy wordings do not provide cover for business interruption as a result of the general measures taken by the UK government in response to a pandemic”.
Settle claims quickly
Woolard has admitted that most UK businesses will not be eligible for insurance pay-outs due to the pandemic.
Most small businesses will not have the resource or time to take the UK’s largest insurance companies to court and Woolard stressed the importance of claims being “assessed and settled quickly”.
He advised insurers should consider interim payments and warned an unwillingness to do so could be held against the provider’s regulatory record.
Willingness to pay
Mark Heath, chief executive officer at insurance solutions provider ACIES MGU, told the Daily Update (16 April) that insurers will need to pay attention to their ‘Willingness to Pay’ claims rating during and after the lockdown.
The FCA has not yet said it would downgrade this rating for insurers during the crisis, but Heath suggests this could be done for those who are slow to support claimants.
He said that “the willingness and speed of claims settlements may prove to be more importance than the price of an insurance policy going forward”.
Heath claims ‘Willingness to Pay’ could become as important a factor for business and individuals taking insurance policies as pricing.
The FCA hopes the Financial Ombudsman Service could accelerate decision making in the industry.
This service settles individual disputes between consumers and businesses that provide financial services “fairly and impartially” and has a legal mandate to enforce verdicts.
It could provide an alternative to court proceedings for businesses who turn over less than £6.5m, have a balance sheet below £5m and have fewer than 50 employees.
More details about the approach of this service towards business interruption cases during the pandemic will be announced shortly, the FT reports.