'It's do or die time for my insurer to pay up'

By Dan Ascher
Business Reporter

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image copyrightAndrea Burley
image captionAndrea Burley and her dog Baxter in front of the kennel

Normally, at this time of year, Andrea Burley would be looking after 40 dogs, as their owners jet off for the Easter holidays.

But this year Holmewood Kennel is home to just one.

With holidays and weddings cancelled, and with many working from home, people have not had much need for dog care.

A year ago she thought her insurance policy would help cover some of the losses, at what was once a £200,000-a-year business. But so far she has received nothing.

Instead she used her own savings to keep the business afloat.

Had she not, the kennel would have gone under, and Ms Burley would have lost her home, which is tied to the business.

But with loans falling due, Ms Burley says it is now "do or die" for her company.

Still waiting

When the UK first went into lockdown in March last year, Ms Burley was one of thousands of business owners who turned to their insurers for help.

Those with business interruption policies were confident that their insurers would pay out if they had to close their doors because of the pandemic. Business interruption policies are designed to cover financial losses if a firm cannot operate.

image copyrightGetty Images
image captionThousands of businesses have failed due to the pandemic

But a year later the vast majority are still waiting for their money.

That's because, shortly after the first lockdown came into effect, insurers - including Ms Burley's insurer MS Amlin - began issuing documents flatly refusing to pay, arguing that their policies were not designed to cover losses from events like pandemics.

Typically, insurance contracts contain exclusion clauses, for events that were explicitly not intended to be covered under the policy. But a number of insurers didn't exclude events like pandemics from their cover and, indeed, their policies read as though losses caused by an event like the coronavirus outbreak should be paid.

Ms Burley said her policy didn't exclude pandemics. In fact, it explicitly covered any losses as a result of someone falling ill with a disease that was notified to the authorities within 25 miles of her kennel. Her local hospital is two miles away.

Because so many insurers were rejecting claims like Ms Burley's, the city regulator, the Financial Conduct Authority (FCA), took the unusual step of launching legal proceedings against a number of insurers. It asked a judge to decide whether the losses of 370,000 businesses across the country would be covered.

The court found that some of those insurers, including MS Amlin, should have paid out on some claims. However the insurers again refused and appealed to the Supreme Court, which, at the beginning of this year, also found in favour of the small businesses.

Slow progress

Since then the insurers involved in the case have begun paying claims, but some more promptly than others.

New data from the FCA shows that five weeks after the Supreme Court judgement was issued on 15 January, MS Amlin hadn't decided to pay any of the more than 3,700 claims that had been made by its policyholders.

Since then, the company said, it has "made progress in settling claims and providing interim payments to eligible policyholders" although it refused to say how many businesses had received a pay-out.

image copyrightGetty Images
image captionThe Supreme Court found largely in favour of small businesses when it handed down its decision on 15 January

Another insurer, Hiscox, had only handed money to 151 of its customers by 3 March - almost seven weeks after the Supreme Court ruling. The numbers from the regulator showed it was still deciding whether to pay another more than 4,500 claims. The data implied that, on average, only around three claims a day were paid during that period.

And even though some of those claims are worth up to £100,000, which is make-or-break money to businesses like Ms Burley's, insurers are not always offering to pay the full value of those claims.

In fact, in at least 24 cases, Hiscox agreed the claim was covered, but said it decided the value of the claim was £0, according to Mark Killick.

Mr Killick set up the Hiscox Action Group to pressure the insurer to pay claims after his PR agency Media Zoo was refused a payout from the insurer.

"Even when they're forced to pay out, they are dragging their feet extraordinarily with these sort of tactics," he said. "Hiscox don't want to pay."

"They've made a mockery of 'my word is my bond'," he said.

A source close to Hiscox said it had since revised some of its £0 offers but would not confirm how many were made.

And in a statement the company said: "We are paying claims as quickly as possible in line with the Supreme Court judgment."

'Shocking'

Hiscox said both the number of claims it had accepted and payments had "increased significantly" since the beginning of this month, although it did not say how much it had paid out.

But Richard Leedham, a partner at Mishcon de Reya, which represents some of the businesses taking legal action against Hiscox, described the insurer's lack of speed as "shocking". While most insurers were beginning to pay, Mr Leedham said, data from the FCA suggested neither Hiscox nor Amlin were moving very quickly.

Hiscox said: "These are complicated claims that require comprehensive financial information and discussions with customers in order to settle them fairly.

"In total, we expect to pay out $475m (£345m) in Covid-19 claims, including for business interruption."

The FCA data shows that, so far, more than 10,000 policyholders have received some money, and insurers have already paid out more than £470m. But more than 50,000 are still waiting. Total pay-outs could exceed £1bn.

The FCA will continue to publish data monitoring progress of payments, a spokesperson said.

"It is critical that the momentum seen leading to the Supreme Court judgment is maintained and that all businesses with valid business interruption claims receive the final settlements due to them as soon as possible."

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