On Oct. 4, UK FCA issued review of BI cover claims handling.
FCA published results of review of business interruption (BI) insurance claims handling.
Set out examples of good practices and areas where firms fall short of expectations.
As well as next steps for firms to take to ensure that they comply with requirements.
Follows UK FCA Jan. 2021 wrote on insurance business interruption cover, see #96359.
Background
Covid pandemic meant an unprecedented volume of BI claims, uncertainty re: cover.
Supreme Court judgment of Jan. 15, 2021, provided policyholders and insurers with clarity about whether customers had cover and could make valid claims on BI policies.
FCA has sent 3 Dear CEO letters to BI insurers setting out its expectations, firms must handle claims promptly and fairly, treat customers fairly and act in their best interests.
In 2022 FCA reviewed a sample of firms' processes for handling BI claims to see if they were handled promptly and fairly, and to identify lessons learned for the market.
Good Practices
FCA saw some practices that demonstrated some firms are putting the customer first.
Some insurers quick to move resources to priority business areas and employ technical external expertise where needed, range of customer contact channels made available.
Interim payments issued using basic information received from policyholders, with more detailed assessments of further information to determine full, final settlements.
Firms issued proactive communications encouraging policyholders to provide required information to progress their claims, including increased engagement with brokers.
Ensured financial information requests were tailored to size and complexity of the business, allowed degree of flexibility consistent across firms of similar size or type.
Created new working groups, project teams, committees to provide more oversight.
Areas for Improvement
Firms and partners did not produce clear and robust conduct management information, which affected their ability to identify and address delays in the BI claims process.
Some firms did not have records of policy wordings that were easily accessible for claims handlers, including 3rd parties, which resulted in delays for customer claims.
Quality assurance processes were primarily focused on reviewing settlement amount paid to customer instead of adequately reviewing the entire customer journey.
Communications not tailored to the recipient in all cases, with same style/language used for brokers and direct customers with different levels of technical understanding.
Financial information requested by insurers from SMEs on their business did not always consider size/complexity of firm, in some cases was overly burdensome and excessive.
Firms did not identify their vulnerable customers accurately or took an inconsistent approach when dealing with vulnerable customers' individual needs during claims.
Customers experienced unnecessary delays in handling of claims due to service by firm, these delays made worse by operational, technological and oversight issues.
Actions for Firms
Findings relevant to all insurers re claims handling approach, irrespective of product.
The FCA's new consumer duty stipulates that firms must support their customer throughout the entire lifecycle of a claim, including through claims handling process.
Regulator emphasizes this is particularly important as consumers are affected by inflationary pressures, rising cost of living, so more customers will be vulnerable.
Firms expected to conduct business in line with FCA rules and requirements, where they do not, the regulator will consider using all regulatory tools to rectify the issues.
FCA expects senior managers to have a clear understanding of the rules, demonstrate they are putting customers at center of the claims process through robust oversight.
Encourages firms to review their claims processes/procedures, and where applicable their outsourcing arrangements, to ensure are effective to mitigate consumer harm.
Also encourages firms to consider, and if relevant, incorporate the areas of good practice highlighted in the review into their handling of claims across all product lines.
