FSCA says national lockdown can't be used as grounds to reject insurance claims

The Financial Sector Conduct Authority plans to take action against insurers who are non-compliant.

On Thursday, 9 July, the Financial Sector Conduct Authority (FSCA) said that some insurers are deliberately avoiding paying business interruption claims where no grounds exist to do so. 

“The national lockdown cannot be used by any insurer as grounds to reject a claim,” the FSCA said. “Such conduct goes against the principles of treating customers fairly and breaks down confidence and trust in the insurance sector.” 

The authority said that it would take action against insurers who are not treating their customers fairly, adding that it may issue specific directives to insurers who seem to be non-compliant.

On 19 June, the FSCA seemed to accept insurers’ argument that the lockdown is not covered by most business interruption policies, saying that it was “of the firm view that the national lockdown was not intended and cannot reasonably be interpreted to be a trigger for business insurance claims”. 

However, in the statement on Thursday, the authority said that policyholders can claim in instances where they can show that they have satisfied the requirements of their specific policy, whether this was before, during or after the lockdown. 

“In other words, the national lockdown cannot be used by any insurer as a ground to reject a claim. If a policyholder has a [business interruption] policy with a radius clause and such policyholder can prove that it suffered a loss, for example, less bookings, cancellations of bookings and so forth as a result of the contagious/infectious disease in the area specified in the radius clause, and its business was interrupted or interfered with as a result of measures taken as a consequence of the contagious/infectious disease, including the national lockdown, then the policyholder has a valid claim,” the FSCA said.

The statement is aimed at insurers who are claiming that, even if they cover contagious diseases, the lockdown is a direct cause of their clients’ losses and not a peril covered by their policies.