The FCA has written a "Dear CEO" letter to insurance firms setting out its expectations of conduct in relation to business interruption insurance for SMEs.  The FCA expects firms to consider the needs of their customers and show flexibility in their treatment of them in the current crisis. 

The FCA estimates that most policies have basic cover and do not cover pandemics. It does not expect insurers to pay out in relation to these. However, it notes that there are policies where it is clear that the firm has an obligation to pay out on the policy, and it is important that claims on these policies are assessed and settled quickly, with payouts made as soon as possible. 

A number of customers may be unclear as to whether or not they have appropriate cover in place. Firms can assist customers by providing clear, accurate and timely communication. Importantly, the FCA is gathering information from firms in order to assess how they are interpreting policies, and it seems likely that it will take action where it believes firms are not acting in accordance with its expectations and requirements.

If only a partial payment on a claim is due, the FCA considers that firms should adopt the approach of making an interim payment. Firms that disagree with this approach need to provide reasons to the FCA for reaching that decision and explain how this represents a fair outcome for consumers. It warns that firms' decisions in this area are likely to "help inform [the FCA's] assessment of [firms'] culture".

The Dear CEO letter provides helpful guidance to firms, while still warning that that treating customers fairly is crucial. It seems likely that if firms have sought to disadvantage customers for their own benefit, the FCA will take action against them.