Lobby group welcomes watchdog's stance on business interruption claims

Insurance Claims Africa has welcomed the Financial Sector Conduct Authority's pronouncement that the lockdown cannot be used to reject insurance claims.

The authority on Thursday expressed concern about the behaviour of some insurers who are deliberately avoiding paying business interruption claims where no grounds exist to do so.

Insurance Claims Africa — a specialist public loss adjustment company representing more than 500 businesses in the tourism and hospitality sector in their battle to get large insurers to pay out on Covid-19 business interruption insurance claims  — said the authority's pronouncement was a step in the right direction.

ICA said insurers have been rejecting business interruption claims, even though the claimants have extensions that cover infectious and contagious notifiable diseases.

In refusing the claims, insurers said these policies were never meant to cover pandemics and that the government’s lockdown, and not the Covid-19 pandemic, caused the significant losses faced by the tourism and hospitality industry.

“This is a massive step in the right direction, and we applaud the FSCA for its brave and clear guidance and proactive approach to this important matter,” CEO of ICA Ryan Woolley, said.

Woolley said the statement by the FSCA unequivocally ruled out the interpretation by the insurers of these policies.

“Nonetheless, we still invite the insurers to talk to us about a sensible compromise settlement,” Woolley said.

The authority said a recent Western Cape High Court judgment in the matter between Cafe Chameleon CC v Guardrisk was in line with authorities' position on the matter.

The court rejected the insurer’s argument that the losses suffered by the claimant were due to the lockdown, and not the Covid-19 pandemic.

“ICA believes that the insurers should not act contrary to their controlling authorities' directives. To do so would increase the public's already poor impression of those insurers not paying these claims,” concluded Woolley.

In its statement, the FSCA also warned it will take action against insurers who do not treat their customers fairly.

It said the conduct by some insurers went  against the principles of treating customers fairly and broke down confidence and trust in the insurance sector.

“The FSCA has communicated this view to insurers and will take action against those who  do not treat their customers fairly.”

The FSCA said it expressed its concern to the short-term insurance industry when this matter first arose and engaged with the sector to resolve it.

“The FSCA formalised its concern in the form of a communication that focused on specific aspects of business interruption (BI) insurance cover (communication 34 of 2020).

“This communication followed complaints relating to delays experienced by policyholders in the processing of BI insurance claims and repudiations of (business interruption) insurance claims by insurers.”

Based on this judgment and in an attempt to avoid protracted litigation on further aspects of business interruption insurance cover such as the amount to be paid out, the FSCA said it was engaging with the insurance industry in the interests of all affected policyholders.