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Business: Insurance

Treasury written question – answered on 4th May 2020.

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Photo of Shabana Mahmood Shabana Mahmood Labour, Birmingham, Ladywood

To ask the Chancellor of the Exchequer, what steps he is taking to ensure that insurance companies offer business insurance pay-out insurance claims related to covid-19 in circumstances where there is no provable case of that virus within that company premises.

Photo of Shabana Mahmood Shabana Mahmood Labour, Birmingham, Ladywood

To ask the Chancellor of the Exchequer, what correspondence he has had with major insurance companies on the rate of pay-outs of business insurance in response claims relating to covid-19.

Photo of Shabana Mahmood Shabana Mahmood Labour, Birmingham, Ladywood

To ask the Chancellor of the Exchequer, what steps he is taking to ensure that insurance companies act in accordance with corporate responsibility in response to claims in relation to covid-19.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

The Government is in continual dialogue with the insurance sector about its contribution to handling this unprecedented situation. The Government is also working closely with the Financial Conduct Authority (FCA) to ensure that the rules are being upheld during this crisis.

For those businesses which have an appropriate policy that covers government ordered closure and unspecified notifiable diseases, the Government’s social distancing instructions are sufficient to allow businesses to make a claim against their insurance, provided the other terms and conditions in their policy are met.

The FCA’s rules require insurers to handle claims fairly and promptly; provide reasonable guidance to help a policyholder make a claim, and appropriate information on its progress; not reject a claim unreasonably; and settle claims promptly once settlement terms are agreed. In addition, the FCA has said that, in light of COVID-19, insurers must consider very carefully the needs of their customers and show flexibility in their treatment of them.

Furthermore, on 15 April, FCA sent a letter to the insurance industry, setting out the FCA's expectation of firms regarding their handling of business interruption insurance claims, urging insurers to settle claims quickly in cases where there was a clear obligation to pay the claim in full or in part.

In addition, on 1 May, the FCA published a statement setting out their intention to seek legal clarity on the handling of business interruption insurance claims, in order to resolve any doubt for businesses facing uncertainty on their claims. In their statement the FCA also noted that insurers should look at how they can help consumers who are experiencing financial distress as a result of COVID-19.

However, most businesses have not purchased insurance that covers losses from COVID-19. Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers.

The Government recognises that businesses who do not have appropriate insurance cover will require support from elsewhere. As such, businesses should explore the full package of support set out by the Chancellor, which includes measures such as business rates holidays, the Coronavirus Business Interruption Loan Scheme, and wage support.

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