Shabana has written to the Chancellor regarding business interruption insurance in light of the Covid-19 pandemic.
Shabana was recently contacted by constituents who had taken out business interruption insurance, only to be rebuffed by insurance companies when seeking to make a claim on their policy.
In her letter, she highlights her belief that it is unacceptable for businesses to be having to seek redress through arbitration, the courts, or via the Financial Services Ombudsman where there is no clear need to do so.
Shabana has asked the Chancellor to issue further clarification regarding the behaviour of the insurance industry.
You can read her letter in full below.
Letter to the Chancellor
Business Interruption Insurance – COVID-19
I am writing to seek an update as to what the government is doing to ensure that insurance companies act fairly and responsibly when considering business interruption (BI) claims as a result of the COVID-19 lockdown.
I recently received a response to several Written Parliamentary Questions (41412, 41413, 41414) from the Economic Secretary to the Treasury with regards to this issue. While I understand that many businesses will not have taken out BI insurance policies which cover the situation we currently find ourselves in, I would be grateful if you could update me as to what the government is doing to ensure that insurance firms pay out fairly and promptly to those who have.
I recognise that the Treasury has been working closely with the Financial Conduct Authority (FCA) on this issue, who are currently seeking legal clarity on the handling of BI claims. I am sure you will agree however that, given the current uncertainty, it is unacceptable for businesses to be having to seek redress via arbitration, through the courts, or via the Financial Services Ombudsman where there is no clear need for them to do so. At such a financially precarious time for many businesses, such lengthy delays in securing pay-outs from their insurance companies only act to worsen the uncertainty they are currently facing.
Since the lockdown began, I have been contacted by businesses in my Birmingham Ladywood constituency who believe they should be eligible for a pay-out from their BI insurance policy but have, as of yet, been unable to receive one. While I recognise that the Economic Secretary has said that insurance companies should “not reject a claim unreasonably”, I believe that this position leaves insurers with a significant level of discretion because of its inherent subjectivity. It would therefore be useful if the government could take a stronger position against insurance companies who demonstrate an unwillingness to pay out to their BI insurance policyholders.
I understand that you will not want to pre-judge the legal proceedings currently being taken forward by the FCA but I would welcome further clarification from the government as to the way through which insurance companies should be behaving. The interruption caused to a huge number of businesses by COVID-19 is self-evident and those firms who have BI insurance policies which cover such eventualities should receive a pay-out in a timely fashion. Over eight weeks into the lockdown, I am frustrated that some firms have, as of yet, been unable to do so.
I would be grateful for any further clarity you are able to give on this issue and for any action you can take directly with insurance firms to expedite pay-outs of such claims.
Thank you for looking into this matter.
Shabana Mahmood MP