Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • Sections
  • News

Insurers told to payout on business interruption claims

Open-access content Tuesday 15th September 2020 — updated 3.42pm, Wednesday 16th September 2020
Insurers told by High Court to payout for business interruption claims

UK insurers must payout on the majority of business interruption claims made during the COVID-19 pandemic, the High Court has ruled today in a landmark test case.

The decision means that 370,000 policyholders – mostly small businesses – who suffered losses due to lockdown restrictions could share billions of pounds in damages.

Judges ruled that most “disease” and/or “denial of access” clauses in a representative sample of insurance policy wordings should have provided cover during the COVID-19 pandemic.

The test case was brought forward by the Financial Conduct Authority (FCA) to clarify the scope of business interruption insurance, and insurers have agreed to have any appeal heard on an expedited basis.

“Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders,” said Christopher Woolard, interim chief executive of the FCA. “Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. 

“Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.”

Insurers have disputed liability for business interruption during the COVID-19 pandemic, with most policies for small businesses only containing basic cover as a consequence of property damage.

In response, the FCA selected a representative sample of policy wordings issued by eight insurers for the High Court to review. The judgment is complex, and runs to over 150 pages, but the FCA’s legal team at Herbert Smith Freehills have published a summary on their website.

Although the decision will bring welcome news for many policyholders, it did not confirm that the eight defendant insurers are liable across all of the 21 types of policy wording in the sample.

However, the test case did clarify that the COVID-19 pandemic and government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid.

“The judgement might also lead to more claims being made in the coming weeks and, in the longer term, these rulings will have an impact on how insurance policies are worded and potentially sold,” commented Mohammad Khan, UK general insurance leader at PwC.

“There will be a renewed focus on policy wording standardisation which may impact the freedom of brokers to set slightly different wordings for their clients.”

Meanwhile, financial services company DBRS Morningstar said that the High Court decision could cost insurers up to £10bn, and may also have international consequences.

Marcos Alvarez, senior vice president and head of insurance, said: “The implication of the High Court decision could extend beyond the British insurance industry given the level of integration between insurers and reinsurers on a global scale, the relevance of the London Market, and the common-law precedent that could be used in other jurisdictions.”


 

Author: Chris Seekings

Image credit: iStock

You may also be interested in...

Motor insurers braced for Amazon threat

Motor insurers braced for Amazon threat

Struggling motor insurers could soon have to contend with an additional threat from Amazon as the tech giant prepares to enter the Indian market, GlobalData has warned.
Wednesday 16th September 2020
Open-access content
FCA to ban insurance loyalty penalty

FCA to ban insurance loyalty penalty

The Financial Conduct Authority (FCA) has today unveiled plans to ensure insurance customers pay no more when renewing a policy than they would if they were buying for the first time.
Tuesday 22nd September 2020
Open-access content
Standardised insurance polices eroding consumer trust

Standardised insurance polices eroding consumer trust

The increasing prevalence of one-size-fits-all insurance policies will lead to a rise in disputes over claims and a further erosion of trust in the sector, according to governance experts Mactavish.
Monday 28th September 2020
Open-access content
web_protect-savings_shutterstock_1048521601.png

UK's income protection insurance market to shrink by a quarter

The UK's income protection insurance market is forecast to shrink by more than a quarter this year, despite the COVID-19 pandemic causing the largest drop in employment for over a decade
Wednesday 26th August 2020
Open-access content
iStock-1216034285.jpg

Australians 'panic buying' insurance as COVID-19 fears rise

Australians are “panic buying” life insurance products amid growing concerns about the COVID-19 pandemic, according to research by GlobalData.
Tuesday 18th August 2020
Open-access content
iStock-1129807923.jpg

UK insurers payout £90m during COVID-19 pandemic

UK insurers have paid £90m to the families of people who have died due to COVID-19, according to new figures, which is equivalent to £980,000 every day.
Monday 17th August 2020
Open-access content
Also filed in
News
Topics
General Insurance
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Reserving Analyst

London (City of)
Negotiable
Reference
149485

Senior GI Modeler - Capital and Planning

London (Central)
£ excellent
Reference
149436

Risk Oversight Manager

Flexible / hybrid with a minimum of 2 days per week office-based
£ excellent
Reference
149435
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ