The Financial Conduct Authority (FCA) has raised concerns over how insurance firms have handled business interruption claims, noting several areas for improvement. It highlighted these in a review of business interruption (BI) claims following the test case judgement handed down by the Supreme Court last year.
The FCA has published examples of good practice along with its findings of where insurers have fallen short of expectations in handling their BI claims. Its review praised insurers for “quickly paying out interim payments, reallocating resources quickly, and proactively communicating with policyholders.”
But the FCA also said firms fell short in keeping records of policy wordings, causing delays for customers. Insurance firms and their partners also failed to live up to standards for identifying and addressing delays in the claims process.
Moreover, the FCA found firms took “an inconsistent approach” in dealing with vulnerable customers. The agency noted that quality assurance reviews were too focused on the financial outcome of the claim rather than the full customer experience, and that customer communications were not always tailored to the recipient.
The latest business interruption insurance claims data show insurers paid out £1.5 billion to over 36,000 small businesses as a direct result of the test case judgement.
The FCA stressed that claims handling is a key part of the customer experience with insurers. In a Press statement, it said it would “consider, where necessary,” all regulatory powers available to address the issues it identified.
“We have been working alongside insurers to ensure that claims are settled quickly, but we are not complacent,” said Sheldon Mills, executive director of consumers and competition at the FCA.
“Today’s report is clear that while we have observed good practice, there are lessons to be learned for the handling of all claims. As consumers and businesses across the country are affected by inflationary pressures and the rising cost-of-living, it is crucial that insurers are handling claims promptly and treating customer fairly.”
