CII calls for action to avoid future FCA legal cases

The Chartered Insurance Institute has urged insurance professionals and government to act now to reduce the need for legal proceedings like the FCA’s business interruption test case in future

The professional body has urged the profession to focus on three areas of activity:

• Product governance processes, including gaining greater clarity on product wordings. Where the same words and phrases are used in different contracts, there should be a consensus among professionals about what those terms mean, so that consumers can be reassured that two policies that look the same on paper cover the same risks. 

• Improve advice processes (and non-advised buying processes) to help clients understand both the insurable and non-insurable risks they face, and what they can do about each one.

• Establish an approach to pandemics and other systemic risks that clearly sets out the scope of government intervention. If the government clarifies the risks it is prepared to cover, the market can be clear on how it will cover the risks that it is capable of covering.

Sian Fisher, CEO of the Chartered Insurance Institute, said: ‘As the professional body for insurance, our key concern is to build trust in the profession. For this reason, we welcomed the test case when it was launched, as it will create greater certainly around the legal basis of business interruption contracts.

‘Although the High Court decision will bring greater certainty to the situation, we must bear in mind that this decision may be subject to appeal.

‘Business interruption insurance is a crucial product for many SMEs. It provides for a wide range of risks that could threaten the survival of a business, including fire and flood.

‘Looking to the future, insurers, brokers and government must act now to reduce the need for court cases such as this one in future.’

Chartered transparency forum

The Chartered Insurance Institute has also created a Chartered transparency forum to examine ways the profession can best meet the expectations of consumers.

The forum will bring together consumer representatives, legal experts and leading practitioners from across the insurance profession in order to:

• calculate the insurance expectation gap in policy coverage versus customer understanding – with indications of how it can be addressed;

• publish and promote guidance, outlining the principles by which all professionals should take accountability for improving transparency, engagement and comprehension of communications relating to policy coverage;

• identify existing learning materials and prioritise the development of future learning materials to improve the profession’s broad expertise in how policy wordings work, and how their drafting can better match brand promises, marketing messaging and consumer expectations; and

• lead a campaign to promote the above standards and learning with the objective of collectively improving public trust by reducing the expectation gap.

The group, chaired by Melissa Collett, Professional Standards Director of the CII, consists of multiple directors and partners, see full list below.

Fisher added: ‘When people buy insurance, they are buying a promise of help when things go wrong. But too often, there is an expectation gap between what customers thought that promise was and what the provider intended. To improve trust, we must understand exactly what leads to that gap, and how we can reduce it together.

‘This forum will establish “what good looks like” and encourage good practice across the profession. I look forward to working with everyone who wants to build trust in insurance to put the insights of the forum to good use and establish principles for the profession to follow.’

Further reading:

The list of contributors to the Chartered transparency forum

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