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Insurance companies are being brought to court to decide whether thousands of companies have mistakenly rejected interruption payments due to the coronavirus.
The spread of Covid-19 has seen many companies close their doors and stop working across the UK, and Chancellor Rishi Sunak came under increased pressure to help small businesses.
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The Financial Conduct Authority (FCA) is now seeking clarity on whether these distressed companies should be entitled to claim their insurance policies for the interruption.
The regulator will take various complaints to court to help it establish the framework for how insurance companies should respond to claims in the future.
The FCA is writing to several companies asking them why they have rejected commercial insurance claims.
They will have until May 15, 2020 to respond to the FCA: the watchdog will decide who to bring to court based on the responses it receives.
What help is there for companies?
The government has introduced a series of measures to help businesses large and small during the coronavirus crisis.
- The government has offered workers without permission through its Coronavirus job retention scheme, paying up to 80 percent of wages up to £ 2,500 per month
- While freelancers can get up to 80 percent of earnings paid by the government for the next three months, again up to £ 2,500 per month
- Under the Coronavirus business interruption loan plan, SMEs can obtain loans and overdrafts of up to £ 5 million for up to six years and the government with a guarantee of up to 80 for each loan
- Small businesses can get grants of up to £ 10,000 to help with ongoing business costs
- It has also announced VAT payments and self-assessment tax returns are deferred during three months
- SMEs that are unable to pay their tax bills can apply to HMRC for a “pay time” agreement to suspend any debt collection
- And they can get up to two-week sick pay – almost £ 200 per employee up to 250 staff members – reimbursed by the government.
- A 12-month holiday with commercial rates has been introduced for many companies
- Community businesses can now apply grants of up to £ 25,000 of a new £ 12 million cash jackpot created by Power to Change.
The FCA says the cases it decides to bring to court will highlight the “key issues” that have confused clients, in terms of their eligibility to file a claim.
The signatures will be brought to court on an “agreed basis”, which means that companies could refuse to show.
The FCA told The Sun that it will not name the companies it is writing to.
The new guide comes when new research by insolvency firm Begbies Traynor Group claims that half a million UK companies are on the verge of collapse.
It is also estimated that only two percent of small businesses have received coronavirus loans.
Businesses that want to file an individual complaint about their insurance firm can still contact the courts separately or file a complaint with the free Financial Ombudsman Service.
Christopher Woolard, Acting Executive Director of the FCA, said: “Our planned court action is designed to resolve a selected number of key issues causing uncertainty as quickly as possible and to provide greater clarity to all parties, both insured and insurer.
“Clearly, decisive action is appropriate given the severity of the potential consequences for customers.”
Simon Sloane, a partner at the European law firm Fieldfisher, added: “This late action should be received with caution by UK companies.
“It is critical to the credibility of both the FCA and the insurance industry that all appropriate legal issues are included in any trial action and that this does not simply become a tool for insurers to deny more claims.”
We’ve asked the FCA what happens if companies are found to have wrongfully rejected insurance claims in court, and we’ll update this article when we learn more.
Insurers must reimburse premiums and pause reimbursements
Meanwhile, the FCA is also asking insurers to consider reimbursing premiums and pausing payments for clients who have been financially affected by the coronavirus.
For example, the surveillance guideline suggests that clients should be entitled to a refund if the insurer is unable to fulfill part of a claim due to closing restrictions, or part of the policy is no longer relevant due to an event that is canceled.
This guide includes all insurers, not just commercial insurance companies.
If confirmed, the measures will take effect in late May and will be reviewed in three months.
The FCA proposes giving insurers up to six months to assess whether their policy still offers good value for money.
CORONAVIRUS CRISIS – STAY KNOWN
Don’t miss out on the latest news and figures, and essential tips for you and your family.
The Sun has already outlined how you can get a refund on your car insurance, while Admiral has announced plans to give 4.4 million customers a refund of £ 25.
James Blackham, executive director of the pay-per-mile auto insurance provider By Miles, said: “If you drive less, you should pay less, and the FCA said today that motorists could be offered a significant reimbursement of their auto insurance. .
“Fewer cars on the roads means fewer chances of an accident and far fewer claims.”
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FCA last month he ordered banks to give credit-card and loan troubled customers a break from payments.
The watchdog has also delayed new credit card rules that would have seen borrowers’ accounts suspended if they had only been making minimal payments.
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