The FCA’s predilection for thematic reviews continues.
This May the FCA published its review of commercial claims handling standards, with the focus on the handling of small and medium sized enterprise (SME) insurance claims. As a result of the review, the FCA expects insurance firms to take appropriate steps to ensure that SME customers are treated fairly at the claims stage. It intends to meet with senior industry figures to discuss its findings and expectations as to how this might be achieved.
Claims Service and SMEs’ expectations
The FCA has conducted a review of commercial claims handling standards and has identified a gap between the claims service received and SMEs’ expectations. The FCA emphasises that insurers should take steps to treat their SME customers fairly, not least because SMEs are often less likely to be sophisticated customers, with many having similar knowledge and experience to retail consumers when purchasing insurance products.
Historically, regulatory responsibilities have been given little or no attention in the context of handling commercial claims. Insurers will consider a claim by reference to substantive insurance law, and not by reference to the higher level concerns imposed by the regulator.
However, these higher level concerns exist. The Insurance Conduct of Business regulations (ICOBS) impose detailed regulatory responsibilities on insurers to handle claims promptly and fairly and prohibit ‘unreasonably rejecting a claim’. These requirements transcend insurance law standards. It is therefore important that insurance firms begin to consider their regulatory responsibilities along with any legal rights they may have under the insurance policy.
Improved communication with SMEs
The FCA makes it clear that making contact with a claimant immediately after the notification of a claim is imperative to avoid delays in the progression of the claim. SMEs were unclear about the roles different parties play in the claims process, they had to chase for progress updates in relation to their claim and they were not given a clear plan detailing the stages in the claims process and the timescales involved.
No longer. The FCA now expects firms to provide its customers with all of the information they require to navigate the claims process at the outset.
It is anticipated that firms will now have to amend their claims handling procedures to include an assessment of regulatory standards before a decision is made to reject a claim. The FCA is otherwise likely to treat an insurer’s process as a breach of its rules and take action through a supervisory notice and/or enforcement action.
For those involved in representing insureds and/or advancing claims on their behalf, the FCA’s intervention is welcome news. Treating customers fairly can often seem a nebulous concept when set against the weight of statute and case law, but the guidance offered in this recent thematic review is clearly designed to assist SMEs in making successful insurance claims. Combined with the provisions of the Insurance Act 2015, which will be in force in August 2016, it represents a significant (and, some would say, long overdue) shift in the balance of power between insurer and insured.
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