The City watchdog on Wednesday admitted that most insurance policies held by small firms were unlikely to provide cover for disruption caused by the Covid-19 shutdown.
The Financial Conduct Authority (FCA) told insurers in a Dear CEO letter that there were no reasonable grounds for it to intervene in such circumstances, given that most business interruption policies had basic cover that did not deal with pandemics.
However, the FCA’s interim boss Christopher Woolard said that there was an obligation for insurers to assess and settle other claims quickly. Where there are grounds not to pay claims in full, insurers should look to make an interim payment.
He said: “Many firms are already doing this. If you disagree with doing so, we would like you to send to us the grounds for reaching that decision, including how you believe it represents a fair outcome for customers.”
Insurers have also come under pressure from the Prudential Regulation Authority over the payment of dividends during the crisis. Today, car insurer Hastings said it would still pay its 2019 dividend worth £36 million on May 29.
The group pointed out that it had no direct exposure to Covid-19 through travel or business interruption insurance, adding that its capital position remains strong.
It claimed the reduction in accident claims due to the lockdown was offset by inflationary pressures from disruption to repair networks and supply of parts.
