Most BI policies have no obligation to cover pandemics: FCA

The UK’s Financial Conduct Authority (FCA) has said that most policies do not cover pandemics and therefore would have no obligation to pay out in relation to the COVID-19 pandemic.

FCA interim chief executive officer Christopher Woolard noted that while this may be disappointing for the policyholders "we see no reasonable grounds to intervene in such circumstances". He explained that the comments solely focus on conduct in relation to business interruption (BI) insurance.

FCA outlined its expectations from insurance firms to engage extensively and constructively with policyholders and show flexibility.

"Insurers and brokers have an essential role to play in supporting their customers who may be unclear whether they have appropriate cover in place," Woolard said in a statement.

"Clear, accurate and timely communication is crucial, which we expect firms to deliver," he added. "It is important that claims are assessed and settled quickly."

FCA stated that its key objective is to ensure that financial pressures on policyholders are not exacerbated by slow payment, rather, such claims should be paid as soon as possible.

"If there are reasonable grounds to pay part of a claim but not to make the payment of such claims in full, we would like you and your Board to adopt an approach of making an interim payment," it said, adding that "if you disagree with doing so, we would like you to send to us the grounds for reaching that decision including how you believe it represents a fair outcome for customers."