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FCA tells PI insurers to pay out BSPS claims 'promptly'

FCA tells PI insurers to pay out BSPS claims 'promptly'
 

The Financial Conduct Authority has written to professional indemnity insurers outlining its expectations of these firms in relation to the British Steel Pension Scheme (BSPS) redress scheme.

In a Dear CEO letter published yesterday (November 28), the FCA said while consulting on the redress scheme, it became aware that some firms involved in advising on BSPS transfers were concerned that their PII cover may not respond to claims in connection to matters covered by the scheme. 

In the letter, which was signed by Sheldon Mills, executive director of consumers and competition, he said: “Insurance firms involved with the provision of PII will appreciate that BSPS adviser firms wish to have certainty about the extent of their PII cover and that it responds appropriately to claims in connection with the scheme. 

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“We want firms involved with the provision of PII to understand our expectations in relation to meeting the information needs of their policyholders and how to deal with claims made under PII policies in connection with the scheme.”

The FCA said it expects that insurance firms should be able to give an opinion of whether their PII policy/ies are likely to respond to claims about BSPS advice, based on the information available at the time of the request.

“We expect that such information is readily available given wider obligations to understand the cover you provide and so you would be able to provide this information without undue delay to support the assessment BSPS scheme firms need to undertake,” Mills wrote.

When providing this indication of cover, the regulator expects insurance firms to be able to state whether the PII policy is expected to provide cover for claims falling within the scheme. 

Where the PII policy is not expected to respond to such claims, a summary of the reasons for this is required such as whether the policy is subject to an exclusion for such business or in relation to liabilities resulting from a consumer redress scheme.

The City watchdog said where BSPS firms make notifications or claims, it expects that PII insurers will:

  • consider notifications promptly and fairly, including whether any notification already made by the BSPS firm under the policy has in the insurer’s opinion engaged or preserved cover in respect of some or all BSPS advice,
  • communicate to BSPS firms the outcomes of their notification- to understand their position and how to make a claim, and 
  • handle claims promptly and fairly including to pay out claims promptly once settlement terms are agreed.

“This is to ensure that the scheme runs as smoothly as possible,” Mills wrote. “It will support BSPS firms so they have certainty over the cover that is available to them, and can help consumers receive the redress they are due.”

The regulator encouraged insurers to develop or maintain approaches that speed up reporting and consideration of claims that may arise as a result of the redress scheme. 

It emphasised that these expectations are aligned with the forthcoming new consumer duty, and will be set out in principle 12 which will require firms to ‘act to deliver good outcomes for retail customers’. 

“We make clear that both you and the insured party have a responsibility to avoid causing foreseeable harm and help ensure that customers are compensated for any harm they may have received,” Mills said.