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Apr 15, 2020

Business News: Insurance firms ordered to pay out or explain

2-3 minutes - Source: BBC



The Financial Conduct Authority has ordered insurance companies to pay out claims to firms "as soon as possible" or explain themselves to the watchdog.
The FCA has told insurers if there are reasonable grounds to pay part of a claim but not the full claim, they must make an interim payment.
If not, insurers must tell the FCA how they reached the decision and how it is "a fair outcome for customers".
The move is aimed at relieving pressure on firms during the Covid-19 lockdown.
"A key objective of the FCA is to ensure that financial pressures on policyholders are not exacerbated by slow payment, rather, such claims should be paid as soon as is possible," the FCA's interim chief executive, Christopher Woolard, told insurers in a letter.
"This is consistent with the wider objective of the authorities to support business and consumers during the current crisis."
Mr Woolard admitted that following conversations with insurers, it was clear that most business interruption policies held by small and medium-sized businesses only had basic cover which did not include pandemics and therefore insurers had no obligation to pay out in relation to Covid-19.
"While this may be disappointing for the policyholder, we see no reasonable grounds to intervene in such circumstances," he said.
The FCA said that smaller companies, classed as firms with turnover of less than £6.5m and fewer than 50 employees, could take complaints to the Financial Ombudsman.
Mr Woolard added that the City watchdog had set up a small business unit, responsible for "gathering intelligence about the treatment of small businesses by financial services firms during the crisis and ensuring a co-ordinated response by the FCA to any issues identified".

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