The Financial Conduct Authority (FCA) has warned insurers it has not ruled out taking enforcement action where customers have not been treated fairly over business interruption claims from the Covid-19 pandemic.
The move follows last year’s Supreme Court judgement on a test case brought by the FCA to resolve contractual uncertainty around many business interruption claims following the pandemic.
Latest insurance claims data reveals that £1.5 billion has now been paid out by insurers to more than 36,000 small businesses as a direct result of the test case.
The FCA has now published examples of good practice and where insurance firms have fallen short of expectations in handling claims.
The review identified good practice such as firms quickly moving resources to priority business areas and employing technical external expertise where necessary. Interim payments were issued using basic information received from policy holders, with more detailed assessments of further information to determine full and final settlements.
A range of channels were made available for customers to contact firms, such as greater telephone access and web-based forms, the FCA found. Firms also issued proactive communications encouraging policy-holders to provide information to progress their claims.
However the review also found firms and their partners did not produce clear and robust conduct management information, which affected their ability to identify and address delays in the claims process.
Some firms did not have records of policy wordings that were easily accessible for claims handlers, which resulted in delays for customers.
Firms also did not adequately identify vulnerable customers or took an inconsistent approach in dealing with their needs, the watchdog said.
Quality assurance reviews were too focused on the financial outcome of claims rather than the full customer experience and failed to identify unreasonable delays. Customer communications were not always tailored to the recipient.
The FCAS said claims handling is a key part of the customer experience with insurers, and it “will consider, where necessary, all regulatory powers available to address the issues identified”. The watchdog added that it expects senior managers to ensure customers are at the centre of the claims process and encourages firms to review their procedures to ensure they mitigate the risk of harm to clients.