NFU Mutual rejects accusation it misbehaved by deducting government grants from payouts

The insurer said that it was only deducting the value of grants from claims made under a loss of profits extension, and that doing so was in line with government guidance that grant payments be treated as taxable income.

It maintains that its business interruption policies do not provide cover for the coronavirus, but has been paying out claims under an optional holiday accommodation extension to its home insurance policies due to a discrepancy in policy documentation.

Campaign

Earlier this month, the Professional Association of Self Caterers UK lent its voice to a campaign calling for insurers to stop deducing grant money from small business payouts, saying that some of its members have had grants taken into account in the settlement of their claims by NFU mutual.

Coming together under the #justpayit banner, the campaign also includes the Cottagesure Action Group, a group of self-catering accommodation businesses with RSA policies that came under scrutiny in the FCA’s business interruption test case.

Alistair Handyside, executive chairman of PASC UK, said: “Overwhelmingly our members are small, family run rural and coastal businesses for whom the Small Business Grant Fund is a critical lifeline intended to help businesses survive, not a grant to fund insurance company profits.

“Insurers that deduct grant money are threatening our long-term sustainability, and taking taxpayers’ money designed to keep us afloat.

“The impacts of Covid-19 on small businesses in the tourism sector have been devastating. Many are now reluctant to make a claim, even though they are rightfully entitled, having paid their premium. We expect insurance companies to honour their contracts and not behave so poorly.”

Response

NFU Mutual explained that the claims in question related to the holiday accommodation section of its Home and Lifestyle, Home and Lifestyle Plus and Bespoke policies, an extension intended for home insurance customers with a holiday home or a small number of holiday homes.

The insurer said that the policies were not intended to cover coronavirus, but that it had taken to decide to pay claims amid confusion over what was covered due to a discrepancy in the policy paperwork.

It explained that while the policy wording stated that there was cover for loss of profit claims stemming from ‘human disease’ – a phrase defined by reference to an exhaustive list of disease that does not include Covid-19 – supporting policy documents instead used the phrase ‘infectious disease’, which was left undefined.

NFU Mutual said: “Acknowledging the discrepancy, and any confusion this may have caused customers at an already difficult time, we have made the decision to consider Covid-19 under this section for the benefit of these customers.

“This enables us to specifically consider loss of profit claims of up to £10,000 during the government lockdown period, for applicable customers with Home and Lifestyle, Home and Lifestyle Plus, and Bespoke policies with Holiday Accommodation cover.”

Addressing the matter of deducting grant money from claims paid under this extension, the insurer said: “The purpose of the loss of profit cover is to help our customers maintain the same level of profit they would expect during the lockdown period if they were able to run their business. It is not designed to replace loss of income, which is a separate, optional cover available under our cancellation of advanced bookings policy extension.

“Where customers have purchased an extension for cancellation of advanced bookings then deductions to reflect government grants will not be made.

“In line with government advice which confirms that grant payments are taxable income, we must discuss grants and other forms of compensation as part of our usual conversations with customers in order to determine an appropriate settlement for loss of profit. 

“When determining loss of profit, we speak with each customer directly to consider all relevant expenses and income in order to calculate profits earned versus those expected during the period.

“Each customer has unique circumstances, which is why we have a dedicated team assessing these claims on a case-by-case basis, using a fair and consistent approach.”