Maintaining public trust during a crisis

The FCA’s decision to test the wording of certain business interruption contracts in court is preferable to a disorderly and potentially lengthy series of test cases that are less likely to reach a comprehensive and definitive solution.

This could help reduce uncertainly for both insurers and the public. The process which the FCA will use to select test cases will be very important, and it is hoped that the FCA will consult widely with both consumer groups and the insurance sector to maximise the chances of reaching a decision that is fair, comprehensive and definitive.

The key controversy around COVID-19 and insurance has been around the scope of business interruption insurance, with many customers disappointed that their cover did not give them more protection from the massive economic impact of the virus. This kind of controversy is not new. We have seen similar gaps between expectations and reality with cyber insurance and before that, with different forms of liability insurance.

Given the limits to which customers can bring themselves to focus on the finer points of their insurance policies, it is not credible for us, as a profession, to tackle the problem through policy literature alone. We need to start by thinking about all the risks our clients face, not just the insurable risks. For example, one leading broker has adopted this new approach simply by rethinking is annual meetings with corporate clients. It had always put renewal of cover at the top of the agenda, and uninsured risks at the bottom. It has now switched this around, talking about uninsured risks first, along with how clients plan to manage these risks, and renewal of cover at the end. This means clients come out of the meeting with a much greater understanding of the risks they face and the part insurance plays in managing those risks. It gives clients the ability to understand the limitations of their cover without feeling cheated later on.

The insurance sector should also use this as an opportunity to demonstrate that its ability to pay claims quickly is better than most people think. At such a crucial time, insurers can focus on building trust in the profession by delivering the clear, accurate and timely processes that the FCA is looking for. The FCA’s recent approach to business interruption insurance was also set out in their Dear CEO letter, including its decision not to intervene where policies do not cover pandemics.

When life begins to return to some form of normality, this lesson – about looking at the whole customer and prioritising their biggest and most difficult risks – is one the insurance profession must not forget.