Gov't Urged To Stop Insurers Deducting Virus Grant Costs

By Martin Croucher
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Law360, London (November 6, 2020, 12:16 PM GMT) -- Holiday rental companies have called on the government to intervene as some insurers continue to deduct the cost of coronavirus grant support from payouts on claims, despite warnings from the regulator that they should treat policyholders fairly.

The Professional Association of Self Caterers UK has said that insurers are deducting the amount that companies had received from the government's small business grant fund when calculating the amount they would pay out in claims.

The Financial Conduct Authority warned insurance company chiefs in September that the government grant payments should not ordinarily be considered part of a customer's turnover when they calculate lost income under a business interruption policy.

"Some insurers are ignoring the Treasury and the FCA and are continuing to deduct government grants from payouts," Alistair Handyside, executive chairman of the self-caterers' association, said on Thursday. "We now call upon them to take further action and force the insurers to stop deductions and pay back the policyholders."

Handyside said the country's tourism sector has been one of the hardest hit by the COVID-19 outbreak and said it is "shocking" that insurers were limiting payouts.

"The accommodation owners we represent are all small businesses, and the government's small business grant fund was designed to help them survive," he said. "The grant was not intended to fund insurance company profits."

The government launched the grant fund in March, before the first national lockdown, offering small businesses a one-off payment of £10,000 ($13,000) to help keep them afloat.

The Association of British Insurers initially said its members were right to deduct the support from business interruption claims, because otherwise insurers would be "double compensating" policyholders. But the trade body later said that 12 of its members had voluntarily agreed to stop the practice.

City Minister John Glen said in a letter in September that he was "disappointed" that not all insurers had stopped making the deductions. The government would consider further action if the practice continued, Glen warned.

Handyside said on Thursday that the worst offender was farm insurer NFU Mutual. A spokesperson for the insurer told Law360 that it did not believe it was doing anything wrong.

"Not considering grants when calculating a settlement could result in a customer receiving more overall than they had lost," the spokesperson added. "As a mutual with no shareholders to bear this additional cost, it would have to be shared amongst all our customers."

A spokesperson for the FCA said insurers should treat claims on a case-by-case basis.

"Where we see this is not happening, and claims are not being handled promptly and fairly as a result, we will speak with insurers individually and will consider any action we may take," the spokesperson added.

A spokesperson for HM Treasury did not immediately respond to a request for comment.

--Editing by Ed Harris.

For a reprint of this article, please contact reprints@law360.com.

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