FCA raps insurers on business interruption claims handling

Some business interruption insurance claims have been handled well but others have been subject to unacceptable delays and poor practice, according to a Financial Conduct Authority (FCA) review.

Interim payments were made quickly in some cases and there was some proactive communication with policyholders, following a Supreme Court test case judgment in 2021 considering which policy wordings applied to Covid-19 pandemic-related claims, said the FCA.

The latest business interruption claims data show that £1.5bn has been paid out by insurers to more than 36,000 small businesses as a result of the test case.

Good practice by insurers included rapid deployment of resources to priority areas, bringing in external technical expertise, interim payments being issued using basic information from policyholders, along with greater telephone access and web-based forms for customers.

See also: Appeal paves way for thousands of business interruption payouts

Prompt and fair claims handling

FCA rules state that firms must handle claims promptly and fairly, treat customers fairly and act in their best interests, supporting them throughout the lifecycle of a product, including the claims-handling process. 

However, some claims have been handled poorly and there have been unnecessary delays, said the FCA. 

Important areas where firms have not met FCA expectations include:

• Failure to produce clear and robust conduct information, affecting the ability to identify and address delays in the claims process
• Delays caused by claims handlers not being given easy access to policy wordings
• Inadequate identification of vulnerable customers, or an inconsistent approach in dealing with vulnerable customers’ needs
• Too much focus on the financial outcome of the claim rather than the full customer experience
• Failure to identify unreasonable delays.

The FCA has told insurers that customers must be put at the centre of the claims process and that procedures should be reviewed to mitigate the risk of harm to customers.

Sheldon Mills, executive director of consumers and competition at the FCA, said: “As consumers and businesses across the country are affected by inflationary pressures and the rising cost of living, it is crucial that insurers are handling claims promptly and treating customers fairly.”