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More than £1.5 billion has now been paid out by insurers to over 36,000 small businesses according to a review by the Financial Conduct Authority (FCA).
The FCA conducted a review of business interruption claims handling that raised concerns over how firms handled claims from vulnerable customers, record-keeping of policy wordings, and identifying where customers experienced unnecessary delays.
However, the authority did welcome insurers quickly paying out interim payments, reallocating resources quickly and proactively communicating with policyholders to help them with claims following the test case judgement handed down by the Supreme Court last year.
The FCA has now set out examples of good practice and where insurance firms have fallen short of expectations in their handling of business interruption (BI) claims.
These key findings have been published to assist firms in their approach to handling all claims to ensure customers are treated fairly throughout the insurance claims process.
Sheldon Mills, executive director of consumers and competition, said the FCA has been working alongside insurers to ensure that claims are settled quickly.
“But we are not complacent, and this report is clear that, while we have observed good practice, there are lessons to be learned for the handling of all claims,” he said.
“As consumers and businesses across the country are affected by inflationary pressures and the rising cost of living, it is crucial that insurers are handling claims promptly and treating [customers] fairly.”
The review identified good practices by insurance firms, putting customers at the heart of the claims process. This included:
However, the review also identified key areas where firms did not meet FCA expectations regarding fair treatment of customers. This included:
Claims handling is a key part of the customer experience with insurers, and the FCA will consider, where necessary, all regulatory powers available to address the issues identified.
The New Consumer Duty stipulates that firms must support their customer throughout the entire life cycle of a product, including through the claims handling process.
The FCA expects senior managers to ensure customers are at the centre of the claims process and encourages firms to review their procedures to make sure they mitigate the risk of customer harm.