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Business Interruption insurance cover – FSCA raises concerns

In a media release published last week, the FSCA confirmed that the recent judgment (Café Chameleon CC v Guardrisk) is in line with its earlier communication (communication 34 of 2020) and stressed their concern about the behaviour of some insurers who 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. Such conduct goes against the principles of treating customers fairly and breaks down confidence and trust in the insurance sector,” the FSCA emphasised. As a result, the FSCA advised all affected insurers to action BI insurance claims in line with the communication. Insurers are engaging with the FSCA and the FSCA has advised that it may issue specific directives to any insurer which is seen to be non-compliant.

Santam responded on Friday indicating that it is seeking urgent engagement with the FSCA on the matter.

FIA also responded to the FSCA media statement and reassured their members that they have been actively lobbying the regulator to ensure fair outcomes where CBI cover was in place and are in broad agreement with the position shared by the FSCA in its recent media statement. “The FIA remains wholly committed to the Treating Customers Fairly (TCF) principles encapsulated in our regulation. We believe that TCF principles and outcomes are good for the insurance industry and for both commercial and personal lines policyholders. Difficult as it may be, we must work with our insurance partners to reposition the BI and CBI debate towards the value of insurance protection,” FIA reacted.

On Saturday, Londiwe Buthelezi of News24, also reported that the FSCA’s stance is in line with that of the UK’s Financial Conduct Authority, which has taken eight UK insurers to the Supreme Court for a test case. She writes: “In the UK, for example, the Supreme Court is yet to rule on the Financial Conduct Authority’s (FCA) test case. But looking at the FCA response to the defence of eight insurers it took to court, it is clear that regulators in different parts of the world reject insurers’ attempt to separate the lockdown from the virus.’ Just because a matter is caused by or results from one thing does not mean it is not also caused by and results from another and/or that the two things are not inextricably linked so as to amount to a single cause,’ said the regulator in its response to UK insurers.”

In the FSCA’s media release the industry is reminded of the following: “One of the key principles underlying the Twin Peaks reforms is that of treating customers fairly, where products are designed to meet customers’ needs; are sold in such a way that customers understand what they are buying; and unfair barriers such as fine print or unfair proof of claims are not put in the way of customers exercising their rights in terms of those policies.”

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