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23/06/2020

Business Interruption: Letter to Association of British Insurers

The following letter has been sent to the Association of British Insurers:

The Association of Scotland’s Self-Caterers represents around 975 members, who feel that their Covid-19 related claims for Business Interruption have not been satisfactorily dealt with by their Insurer, RSA.

We have watched the response of the Insurance industry generally as the Covid-19 situation has developed, along with the Industry’s robust denial of claims in most instances.

You will, of course, be aware of FCA’s intervention to help clarify the position and we are delighted that RSA’s policies are fully represented in the submission to the courts with regards to the cover it should provide for responsible business owners who took out business interruption insurance in good faith.

For the few Insurers that are currently paying out, we have noticed two aspects that we believe are open to challenge:

  • The treatment by Insurers of the Government grants in respect of the settlement: For those insurance providers who have accepted liability for accommodation providers eg NFU, they are deducting the £10k or £25K Small Business Grant from any loss of income / Business Interruption payout due. The Grant should be seen as support for ongoing business costs (including standing costs such as insurance and utilities). The Business Interruption cover should reflect loss of income during the lockdown, when Government enforced closure of non-essential businesses on 23rdMarch, including self-catering accommodation providers.
  • The treatment of booking deferrals rather than refunds in respect of the settlement: In the absence of Business Interruption insurance payments, many policy holders have not had the funds to return monies to guests who have been unable to take their holidays. Therefore, many guests have been offered deferrals to new dates rather than a refund. Both options (refunds and deferrals) have the same impact on the business’ revenues, since the replacement holiday is being provided free of charge by way of refund, whereas it would otherwise be sold to a booking guest.  Our view is that policyholders should not be penalised in any way, whatever action they have taken in relation to cancelled bookings, and that the full amount of any cancellation, refund or deferral should be taken into account in the calculation of loss.

As the voice of the UK’s insurance industry we are asking what guidance, if any, you are giving to your members, in respect of these two points.

We look forward to receiving your response.

Yours sincerely,

Fiona Campbell

Chief Executive

Association of Scotland’s Self-Caterers

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