Yesterday, the FCA published a "Dear CEO" letter to insurers, regarding Covid-19 and interruption protection for SMEs.
SMEs in all sectors are experiencing unparalleled disruption in their operations as a result of Covid 19. It is therefore not surprising that insurance companies and interruption insurance are increasingly in the spotlight, as companies are looking to see if they can get any insurance cover for their losses.
FCA's "Dear CEO" letter states that the FCA estimates that most SMEs will only offer "basic protection" and not cover pandemics. So, insurers will not be required to pay out. The FCA recognizes that "While this may be disappointing for the policyholder, we see no reasonable reason to intervene in such circumstances."
This statement is likely to be welcomed by many in the insurance industry, given the increasing public pressure on insurance companies . from customers and the media.
However, the FCA's letter "Dear CEO" also clarifies that there will be "policies where it is clear that the company has an obligation to pay out" and in those cases the Swedish Competition Authority will require companies to quickly assess, settle and pay these claims.
Similarly, where there are "reasonable reasons" to pay part of a claim but not the entire claim, the Swedish Competition Authority has requested that the companies adopt the method of making an interim payment. The letter places particular emphasis on this request, stating that when insurers do not agree to make an interim payment, they should inform the FCA of their reasons for making that decision, including how they "believe it represents a fair result for customers. " This, in turn, will "help to inform [the FCA̵
The Swedish Competition Authority also noted in its letter that the Financial Ombudsman Service will share details of what it will take to resolve complaints about interruption insurance in due course. Businesses should make sure they keep an eye out for this.
For questions or advice on how this could affect your business, contact your regular Hogan Lovells contact or a member of the Global Insurance Team.
Author by Lydia Savill and Ellie Rees.