By: AswathyNair
MOST insurance policies bought by smaller companies do not cover for disruption caused by the coronavirus pandemic, Britain’s Financial Conduct Authority said on Wednesday (15).
The watchdog also told banks they must designate a senior manager accountable to the regulator for ensuring that their lending to small businesses is fair.
Britain is in lockdown, with many companies shuttered and millions of people furloughed as the country heads for a deep recession.
The FCA said most insurance policies for small and medium sized companies (SMEs) only gave basic cover, with no obligation to pay out in relation to the COVID-19 pandemic.
“While this may be disappointing for the policyholder, we see no reasonable grounds to intervene in such circumstances,” FCA interim chief executive Christopher Woolard said in a letter to heads of insurers.
“In contrast, there are policies where it is clear that the firm has an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly.”
Interim payments could be made on valid claims to speed things up, Woolard said.
“If you disagree with doing so, we would like you to send to us the grounds for reaching that decision including how you believe it represents a fair outcome for customers,” Woolard said.
The smallest companies could take their complaints to the Financial Ombudsman Service, he said.
The FCA has also set up a new small business unit to ensure that the firms it regulates are supported in the crisis.
In a separate letter to heads of banks, Woolard said that each lender must designate a senior manager that oversees small business lending.
While business loans are generally not directly regulated, the FCA can fine and suspend a senior manager who is not treating customers fairly.
The government has set up a scheme for business disruption loans that banks are implementing, and Woolard said the FCA is monitoring how much money is flowing to companies.
Small companies have complained about treatment by banks in the past, accusing Royal Bank of Scotland’s “global restructuring group” of stripping assets from clients.
Two former bankers at HBOS, now owned by Lloyds, and four business partners were jailed in 2017 for a fraud that siphoned off money from struggling businesses.
“Our objective will be to ensure that there is not a repeat of the well documented historic issues in the treatment of SMEs,” Woolard said.
