Following the news that the Financial Conduct Authority (FCA) is applying pressure on insurers to settle business interruption (BI) claims to SMEs, Ben Carey-Evans, Insurance Analyst at GlobalData, a leading data and analytics company, offers his view:
The FCA informing insurance leaders that BI claims for SMEs should be assessed and settled quickly will come as a boost to the small to medium enterprise (SME) sector. The FCA has also stated that if there are reasonable grounds for not paying out in full, insurers should pay out interim payments - meaning that some SMEs should receive some much-needed funds imminently.
“GlobalData’s 2019 UK Insurance Consumer Survey found that the uptake of BI has been increasing over the past few years. It has risen from a penetration rate among SMEs of 11.1% in 2015 to 17.3% in 2019. This means that a significant number of existing policies will be up for renewal in 2020, and insurers need to do everything they can to retain these customers.
“However, policies that do not have pandemic clauses still do not have to be paid out and the FCA has said it has no reasonable grounds to intervene on these. This will be a blow to many SMEs. They key for insurers is clear communication with SMEs. Smaller businesses will likely be desperate for cashflow, so communicating whether they are receiving a partial or full pay-out, and when, is essential.”