Insurance Bosses warned over COVID-19 Claims
November 24, 2020 – The United Kingdom’s Financial Conduct Authority said it will hold Lloyd’s of London and the heads of other insurance companies responsible if FCA finds evidence that the insurance companies have unfairly treated customers who have filed loss claims that stem from the Covid-19 lockdowns.
Dear CEO Letter
In a Dear CEO letter yesterday, FCA warned that it is examining how insurers in the London market are handling claims from current policies and run-off business.
The City watchdog said that it will use its powers under the Senior Managers and Certification Regime to target Lloyd’s and other insurance company leaders directly if it finds evidence Lloyd’s has treated its insured customers unfairly.
The head of wholesale general insurance at the FCA, Charlotte Cross, wrote to Lloyd’s of London and other insurance company bosses: “Lack of effective governance and oversight may lead to claims not being handled promptly and fairly, which means customers suffer financial detriment.”
Ms. Cross added: “We are already carrying out extensive analysis to establish how firms are dealing with claims arising from the current pandemic. Where we find poor outcomes. . . we will use the SM&CR to hold senior managers accountable.”
FCA wrote yesterday on its web site, in part:
“We expect firms to consider very carefully the needs of their customers and show flexibility in their treatment of them. We are likely to see customers’ behaviours change because of the pandemic. For example, this could mean that customers may need to work from home or commute by car. We would not expect to see their ability to claim impacted by circumstances over which they have little control.
We expect firms to clearly communicate any policy exclusions that may impact the cover and use of individual policies. This applies both to new sales or changes to existing policies (either mid-term or at renewal) – they must clearly meet consumers’ demands and needs.” See the FCA statement here.
FDA takes Insurers to Court
The FCA took eight insurers to court this past summer to investigate whether 370,000 companies could claim on their business interruption insurance over the COVID-19 pandemic.
On Sept. 15, 2020, the High Court ruled largely in favor of policyholders. However, six of the eight insurers appealed the case to the U.K. Supreme Court. A final ruling is expected either before Christmas or in January 2021.
The FCA said in its letter yesterday that where the High Court judgment was not currently being appealed, insurers should start paying out on claims.
Ms. Cross added: “We will take the judgment into account when looking at whether insurers are handling claims for any resolved aspects fairly.”
The SMCR regulation means that senior managers can be held responsible for what happens on their watch. The rules became binding on insurers from December 2018, and on brokers from the following year. Ethical breaches can result in substantial fines that might reach up to 40% of an executive’s annual income.
In response to two freedom of information requests, the FCA said the regulation covers 72,692 company executives, and that FCA has investigated claims against 377 individual insurance bosses.
Any details regarding the imposition of any fines are not clear. Law360 London reported that an FCA spokesperson was not immediately available for comment.
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