What the FCA Case Means for Global Policies

It is a common perception that insurance policies are complex, challenging, and designed to skew in favor of carriers. 

While those of us in the insurance industry believe this isn’t true, we still have significant work ahead of us to overcome this perception and offer trusted, well-received and comprehended policies.

The recent Financial Conduct Authority (FCA) case in the United Kingdom brought this issue to light again, with the Court’s comments making it clear policy wording had shaped the outcome of this case, with more than 700 policies likely to be impacted.

This is an issue we expect to continue to play out around the world, as cases testing the strength of business interruption policies, in light of COVID, conclude and social inflation continues to grow.

There were three core areas the UK FCA case raised which we expect to see mirrored in other regions:

1. Disease exclusions

The Court found that these exclusions were often overlooked when it came to updating policies and queried what value the policy could offer if it did not cover the impact of disease. It also questioned whether COVID could be excluded as it was not a general disease, and the restrictions around whether a disease had presented close to the claimant’s business were criticized. The carrier’s argument was that it was impossible to prove a single, local case of COVID impacted a business, but this was negated by the Supreme Court’s finding that each and every case of COVID was an equally effective cause of the government’s reaction to the pandemic.

2. Prevention of access or general exclusion clauses

Policies with these clause types were relied upon by carriers to expressly provide against cover, but where the Court found this failed was that exclusions cannot apply where a carrier has given an express grant of cover with one hand and taken it away with another.

It is understandably confusing for a policy holder to read they are both covered and not covered, but this judgement will have far-reaching consequences for the industry. Hundreds of policies make specifications around what can and can’t be claimed for, and if we can no longer state general exclusions it will have major impacts to claim costs.

3. Quantification argument

The Court found carriers excluded or removed the benefits of coverage by arguing that because the insured risk was limited to the number of cases in that specific area, that there would have been minimal or no loss because the business may not have been impacted at all by local cases. But, the Court argued that due to its issues with the disease exclusions, insurers would now need to consider what position claimants would be in if we were in a COVID-free world.

So, where to from here?

Carriers need to ensure they, and any of their suppliers or TPAs, are across changes to legislation and business interruption test cases in their region. As an industry, we also need to consider how we build and present policies to policy holders and whether they are truly fit for purpose in a world that has drastically changed.

To learn more about how Gallagher Bassett helps clients deliver better outcomes, connect with our team at RIMS 2021.

Jon Stambaugh

More Posts

Insights

How GB’s Award-Winning RMIS Platform Is Boosting Carrier Outcomes

In today’s carrier landscape, turning data into actionable strategies is crucial to staying ahead. Gallagher Bassett’s award-winning RMIS platform, Luminos, is leading the charge in reshaping risk management and harnessing data. Find out how Luminos is revolutionizing risk management practices and empowering carriers to achieve success.

Read more
Insights

Navigate Changing Customer Expectations by Accelerating the Claims Lifecycle

Navigating the dynamic carrier landscape requires a keen understanding of evolving customer expectations, the pursuit of service excellence, and staying across the latest technology trends. In our new whitepaper, “The Carrier Perspective: 2024 Claims Insights,” we delve into how carriers are adapting to meet these shifting demands while leveraging technology to drive innovation. As we move through 2024, the focus remains on accelerating the claims lifecycle and delivering superior customer service as a cornerstone of success.

Read more
Insights

Introducing the Carrier Perspective for Your 2024 Outlook

We are excited to launch “The Carrier Perspective: 2024 Claims Insights” whitepaper. Based on a global survey of 150 carriers, delve into the transformative shifts impacting carriers, from technology advancements to regulatory changes and global trends. The Carrier Perspective is a comprehensive exploration that offers invaluable insight into trends, challenges, and opportunities to drive success for carriers this year. Read on to stay ahead of the curve in 2024.

Read more
Group Of Businesswomen Collaborating In Meeting - Business Services
Insights

What Claims and Client Service Excellence Looks Like in 2024

In an insurance landscape shaped by shifting customer expectations, the key to success is understanding how to respond with quality service. With International Women’s Day approaching, we checked in with a few of the talented women in our claims and client services groups to explore what service excellence looks like. Amy Cooper, VP — Carrier Practice Sales, leads Gallagher Bassett experts Suzanne McCarthy, Margaret Viss, Vicky Kalasmiki, Jill Crane, and Kathy Doyle in a insightful roundtable discussion exploring explore what claims and client service excellence truly means.

Read more

Keep your finger on the pulse of the latest industry news and insights.

Sign up to our monthly newsletter today.

Search

Hi there!

Want to drop us a line?  You can get in touch by filling out the form below and we’ll get back to you as soon as possible!