The FCA has become aware of policyholder concerns over how insurers are calculating claim payments where they have agreed liability where the policyholder has received Government support.
Where insurers have accepted liability, they should continue to handle and assess non-damage BI claims promptly and fairly, and to treat their customers fairly in accordance with Principle 6.
The insurer will need to assess the appropriateness of making deductions for some or all of each type of Government support received by the policyholder with a case by case assessment. The assessment should consider:
- the exact type and nature of the Government support
- how the policyholder used this support
- the type of policy and its precise terms, including any set methodology for calculating the value of a claim set out under the relevant section of the policy
Some of these factors will be case and claim specific. Even where it is appropriate in principle to deduct these amounts, a single, uniform approach to deductions is still unlikely to be appropriate. Insurers are likely to need to consider individually the precise details of the policy, the claim and the use and application of the government support the policyholder received. How Government support is treated for tax purposes may differ from the way it is treated for calculating the loss under a BI policy.
The FCA expects firms to take these matters into account when they calculate non-damage BI claims and also expects them to reflect these matters appropriately in their communications with policyholders when making settlement offers and reaching settlement on relevant BI claims. The FCA makes clear in its statement that it may intervene and take further actions where firms do not appear to be meeting its expectations and treating their customers fairly on these points.
In recent weeks, policyholder complaints, stakeholders and media reports have made us increasingly aware of policyholder concerns about how insurers are calculating non-damage BI claim payments where they have agreed liability. In particular, some insurers are making deductions for some types of Government support those policyholders have received over the past few months.