Tens of thousands of small businesses could receive insurance payouts covering losses in the first national lockdown, following a court ruling.
The Supreme Court has found in favour of small firms receiving payments from business interruption insurance policies. But as ever the devil is in the detail and there are plenty of strings attached.
For some, it could provide the lifeline allowing them to trade beyond the coronavirus crisis.
No doubt the ruling will cost the insurance sector hundreds of millions of pounds, see some rationalisation of the sector, and a reduction in competition. And future policies will cost more. However it’s very important now to get the money out to eligible small businesses as quickly as possible. For many it’s already too late so let’s not have further delays while yet more firms go bust.
The Financial Conduct authority which brought the case says:
“Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. This test case involved complex legal issues. Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.
“We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.”
As many as 60 insurers sold these types of policies. They will now pay out on many, but not all, policies. However you look at it this whole episode will have damaged the trust of small business owners in their insurers. The insurers must now get on with the process of paying out and think about how to reassure customers that insurance is worth having. Many bought these not inexpensive policies and have had to close while waiting for this process to make it’s way through the courts. Businesses, livelihoods and jobs have been destroyed by refusal to pay out claims at the beginning of the crisis. Time is now of the essence for those still operating. Let’s not get bogged down in that detail.