News Coronavirus watch17 Sep 2020

FCA verdict on COVID-19 BI claims could be a bombshell for Asia

| 17 Sep 2020


The landmark verdict by the London High Court on Tuesday, in the business interruption (BI) test case brought by the Financial Conduct Authority (FCA), could serve as a guide in assessing similar BI-related claims arising from the pandemic in Asian countries that follow the common law system.

Speaking to Asia Insurance Review, Willis Towers Watson head of claims in Asia Neil Thomas said, "The judgement is obviously applicable to UK insurers and policyholders but it is likely that other common law jurisdictions in some Asian countries will be following this case closely and may choose to follow the UK court decision.

"For policyholders in the UK or elsewhere, even here in Asia ,who have had their COVID-19 BI claims rejected or who have deferred submitting a claim, it would now be appropriate to review their circumstances in light of the UK judgement and open a discussion with their insurers if a claim seems likely to be covered.”

While describing the verdict as a ‘significant win for policyholders’, he warned that the 160-page judgement had many nuanced findings and many not please every policyholder.

"There is the possibility that the judgement, or aspects of it, will be appealed so the matter is not definitively settled at this point although insurers are likely to take careful notice of the judgement and will review their portfolios in light of the findings."

The Chartered Insurance Institute (CII), meanwhile, issued a statement on the eve of the verdict urging the insurance industry to focus on product governance, including having greater clarity on product wordings, in order to avoid a similar episode in the future.

"Where the same words and phrases are used in different contracts, there should be a consensus among professionals about what those terms mean, so that consumers can be reassured that two policies that look the same on paper cover the same risks," said the CII.

It also called for improvement in the advisory process to help clients better understand both the insurable and non-insurable risks they face; as well as for the industry to establish an approach to systemic risks, such as pandemics, that would clearly set out the scope of government intervention for risks to be co-insured between the public and private sector.

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