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Law360, London (April 16, 2020, 12:38 PM BST ) Insurers should have their "feet held to the fire" through an independent review into their response to claims connected to coronavirus, an insurance consultancy said.
Mactavish said on Wednesday that most insurers would fail to meet the Financial Conduct Authority's demand that they must pay out on claims swiftly because of heavy investment losses and staff shortages.
The London-based consultancy, which provides advice on claims disputes, said the regulator should establish an "independent review process" to monitor how insurers have responded to the crisis.
"With many businesses struggling, insurers have a duty to make any legitimate settlements as quickly as possible," Bruce Hepburn, chief executive of Mactavish,said. "Insurers should have their feet held to the fire over this and the only way of doing this would be to have a review process set up so that their actions can be monitored properly."
The statement comes after the FCA urged insurance bosses on Wednesday to pay out speedily on business interruption claims linked to coronavirus. The letter said that insurers should make interim payments immediately in cases where liability was accepted but the settlement was disputed.
Many insurers sometimes delay making any payment at all, pending a court decision, if the settlement is disputed. Lawyers say that can sometimes mean that cash-strapped businesses accept a smaller settlement than they might believe they are entitled to.
Mactavish said insurers were unlikely to be able to pay claims as fast as the regulator would like. Claims departments are not fully staffed because of the national lockdown or because employees are off sick, the consultancy said.
Significant investment losses could also affect the willingness of insurers to pay claims fast, as they "will want to manage their cash flow more carefully than during normal circumstances," the company said.
Insurers have come under fire for failure to pay claims for interrupted business, with one public relations company considering group litigation with "dozens" of others against Hiscox Insurance.
Hiscox said its policies were not intended to protect against pandemics, which were "simply too large and too systemic for private insurers to cover."
--Editing by Ed Harris.
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