On 1 June 2020 we published draft guidance on our expectations for insurers and insurance intermediaries when handling claims and complaints for business interruption policies during the test case brought by the FCA.
We wanted to act quickly to protect consumers in these difficult times. The draft guidance was therefore subject to a short consultation period, which closed on 5 June. We received 22 responses from interested stakeholders including firms, trade bodies, consumer representatives and law firms.
We have published our finalised guidance. This includes changes or additions in light of feedback to:
- Clarify that the scope of our guidance is restricted to relevant non-damage business interruption policies.
- Confirm that the guidance has the same scope as the rules it gives guidance on. So firms should have regard to ICOBS 1 and DISP 1.1 in determining whether and how the guidance applies to their portfolio of relevant non-damage business interruption policies.
- Make clear within the guidance that coverage issues relating to clauses that have an exhaustive list of notifiable diseases which does not include Covid-19 or to clauses which require the disease to be present on the insured premises are not included in the test case.
- Clarify our expectations of insurers’ reviews of their relevant non-damage business interruption policies to allow them to classify and report all ’disease’ or ‘denial of access’ or similar coverage clauses in two categories; those where the outcome on claims generally (including questions of causation of loss) may be affected by the final resolution of the test case, or those where that outcome won’t be affected.
- Extend the proposed timelines for review and communication to the FCA to 3 weeks, and for individual communication to policyholders who have made claims or complaints to 4 weeks.
- Provide more details and clarity on our expectations of how firms should handle claims and complaints during the period when the test case is ongoing and the parameters around their actions.
Who this affects
- An insurer (as defined in FCA’s Handbook of rules and guidance) which, before the date that the test case began, underwrote a relevant non-damage business interruption policy.
- A managing agent (as defined in the FCA’s Handbook) which, before the date that the test case began, performed functions for a member of Lloyd’s for a relevant non-damage business interruption policy (and references to ‘insurers’ in the guidance should be read as including managing agents).
- An insurance intermediary (as defined in the FCA’s Handbook) which carried out insurance distribution activities for a relevant non-damage business interruption policy before the date that the test case began (but only the paragraphs of the guidance which specifically refer to insurance intermediaries under the heading ‘Communicating with policyholders generally during the test case’ apply).
- The Society of Lloyd’s (but only the paragraph of the guidance which specifically refers to the Society under the heading ‘Co-insurance’ applies).
The guidance comes into immediate effect upon being published on Wednesday 17 June 2020.
We expect the insurers covered by the finalised guidance to review their relevant non-damage business interruption policies to classify them as set out and to report the outcomes of these reviews to us by Wednesday 8 July. This will enable us to publish a list of relevant non-damage business interruption policies affected by the test case.
We also expect firms to consider what general communications they need to make to their non-damage business interruption policyholders. Firms should also consider what communications they need to make to individual policyholders, by 15 July, who have made a claim or complaint in the light of the guidance and the review of relevant non-damage business interruption policies.
We expect relevant firms to identify claims and complaints (included those already declined or where the firm has made an adjustment or deduction for general causation) that are potentially affected by the test case and to take account of this guidance when handling these claims and complaints.
We will review the guidance in light of the progress of the test case and in any event within 6 months of it coming into effect to assess whether it is still needed.