Following its consultation on 1 June, FCA has now finalised its guidance to insurers and intermediaries, setting out its expectations on how they should handle complaints and claims under business interruption policies during the test case. The guidance has immediate effect.
The guidance applies to all insurers, managing agents and intermediaries that underwrote, performed functions for a Lloyd’s member in respect of, or carried out insurance distribution activities in respect of a relevant non-damage BI policy before 9 June 2020. It applies to relevant non-damage BI cover where the policy is within the scope of ICOBS 8 and the applicable law is the law of one of the constituent jurisdictions of the UK. It does not apply where insurers have already decided to accept claims or determined that their policies do respond to the pandemic. These firms must just continue handling and paying claims on a timely basis.
All relevant firms, regardless of whether they are involved in the detail of the test case or not, need to consider:
- in relation to policies underwritten before 17 June 2020, whether the test case may have implications on their decisions on claims and complaints;
- how to keep policyholders informed about the case and its implications; and
- how to ensure they treat policyholders fairly during and after the case.
FCA expects them to appoint a senior manager to oversee its expectations. Alongside the finalised guidance, FCA has published the key documents from the case for firms to read. Following consultation, FCA has made a few changes to the guidance, mainly:
- to clarify that it relates only to relevant non-damage BI policies and has the same scope as the rules it gives guidance on (particularly referring firms to ICOBS 1 and DISP 1.1 when assessing how it applies to their portfolios);
- to clarify that coverage issues of clauses that have an exhaustive list of notifiable diseases that does not include Covid-19 or to clauses which require the disease to be present on the insured premises are not included in the test case;
- to clarify that it expects insurers to review and report disease and denial of access or similar clauses both where the outcome of claims (including causation of loss issues) may be affected by the test case and where it will not; and
- to give more detail on how FCA expects firms to handle complaints and claims while the test case is ongoing.
The guidance covers firms obligations under the Principles, particularly Principles 6,7 and 11, ICOBS, particularly ICOBS 2.2.2R, 2.5-1R and 8.1 and DISP, particularly DISP 1.4 and 1.6. FCA now expects:
- all relevant insurers to review their policies to classify them as the guidance requires and report the outcome of their reviews to FCA by 8 July (giving them 3 weeks to do so, rather than the 2 weeks originally proposed) so it can include relevant policies in its list of policies affected by the test case;
- all firms to consider what communications they need to make to policyholders (generally, by putting communications on their website or other appropriate places as soon as possible) and, in particular, to make appropriate communications, by 15 July, (again, giving a week longer than originally proposed) to individual policyholders who have made a claim or complaint already; and
- all firms to identify claims and complaints potentially affected by the test case and take account of the guidance when handling them – and this applies equally to cases where firms have already declined claims or made an adjustment or deduction for general causation. The guidance includes suggestions on timescales for review of complaints and offers and on stopping the clock in respect of time limits so as not to include the period between 17 June and the final resolution of the test case.
Where an insurer delegates any aspect of claims or complaints handling to a third party, it must ensure the third party is aware of the guidance and applies it – and, of course, the insurer will remain responsible and must comply with its obligations under SYSC. The guidance also covers how it applies where there are co-insurers and where a complaint is within the Lloyd’s complaint handling process.