“While the Treasury Committee cannot intervene in individual cases, we have been examining the insurance industry’s response to the coronavirus as part of our ongoing inquiry into the economic impact of coronavirus. I wrote to the Association of British Insurers (ABI) in March to request a range of information on the industry’s response across a variety of types of insurance product and cover. The ABI’s response argued that only a small number of businesses will be covered for COVID-19 under business interruption policies, stating that the vast majority of majority of businesses purchase standard commercial insurance policies that provide cover only against day to day risks. However, the ABI estimated that insurers could make £900 million in payments for valid business interruption claims and that insurers would consider all business interruption claims on a case by case basis.
“The Treasury Committee continues to hear that businesses are finding it difficult to make successful claims. For example, UKHospitality told us that 71 per cent of its members have had insurance claims rejected. While some firms clearly and unfortunately did not have the correct cover in place, there have been cases of concerning disagreements between insurers and customers. On 1 May, the Financial Conduct Authority (which has a regulatory role in monitoring and supervising the conduct of insurers) announced that it was seeking a court ruling to clarify the basis on which insurers are deciding to accept certain business interruption claims and in particular to test the meaning of certain wording within a number of insurance policies. I have discussed this approach at length with the interim Chief Executive of the FCA, Chris Woolard and I very much welcome the steps the FCA is taking to remove uncertainty in this way.
“You may have seen that the FCA recently called for input from those policyholders who have unresolved disputes with insurers over the terms of business interruption policies and some of your constituents may have put their concerns to the FCA in this way. My hope is that the court ruling will provide clarity for businesses without the need for them to take legal action themselves. The Treasury Committee will continue to monitor and scrutinise developments in this area as part of our inquiry into the economic impact of the coronavirus.”
Rt Hon. Mel Stride MP
Chair, Treasury Select Committee