FCA review of business interruption claims handling

By Zhuan Faraj

On 4 October 2022 the FCA published examples of good practice and where insurance firms have fallen short of expectations in their handling of business interruption (“BI”) claims.

This follows the judgment from the Supreme Court on 15 January 2021, which provided policyholders and insurers with clarity about whether customers had cover and could make valid claims on their BI policies. The FCA closely monitored firms’ handling of BI claims following this judgment.

Examples of good practice by insurance firms were as follows:

• Firms were quick to move resources to priority business areas and employed technical external expertise where necessary.
• Interim payments were issued using basic information received from policyholders, with more detailed assessments of further information to determine full and final settlements.
• A range of channels were made available for customers to contact firms, such as greater telephone access and web-based forms.
• Firms issued proactive communications encouraging policyholders to provide information to progress their claims.

However, there were several instances where firms fell short of the FCA’s expectations, namely where:

• Firms and their partners did not produce clear and robust conduct Management Information, which affected their ability to identify and address delays in the claims process.
• Some firms did not have records of policy wordings that were easily accessible for claims handlers, which resulted in delays for customers.
• Firms did not adequately identify vulnerable customers or took an inconsistent approach in dealing with the needs of vulnerable customers.
• Quality Assurance reviews were too focused on the financial outcome of the claim rather than the full customer experience and failed to identify where customers experienced unreasonable delays.
• Customer communications were not always tailored to the recipient.

The FCA highlighted that under the new Consumer Duty firms must support their customer throughout the entire lifecycle of a product, including through the claims handling process.

The FCA also expects Senior Managers to ensure customers are at the centre of the claims process and encourages firms to review their procedures to make sure they mitigate the risk of customer harm.

The findings from the FCA’s review can be read in full here.

For further UK financial services regulatory updates, please visit the Burges Salmon blog.