Government hits out at insurers over grant deductions from BI claims

“It is the government’s firm expectation that grant funds intended to provide emergency support to businesses at this time of crisis are not to be deducted from business interruption insurance claims,” he stated.

Glen, pictured, noted that the effect of making the deductions – an issue previously reported on by Post – was that rather than supporting businesses and protecting jobs during the pandemic “taxpayer funds are being channelled into savings for insurers”.

He called on providers making deductions to “respect the spirit” of the government support schemes and criticised the cuts in payments as being “clearly not in line with the intention of the support schemes”.

The stark message came in an exchange of letters on 25 September with Huw Evans, director general of the Association of British Insurers.

Evans had written to Glen to update him on insurers’ response to the Covid-19 outbreak and offer reassurance on the insurance treatment of the government grants.

The ABI leader had told Glen that 12 insurers will not be deducting the Local Authority Grant, the Small Business Grant and the Leisure/Retail/Hospitality grants, or their equivalents in Scotland, Wales and Northern Ireland, from any Covid-19 claims payments.

“In the minority of cases where this has already happened, each firm concerned will review these claims and reach out to claimants in relation to adjusting the settlement accordingly,” Evans reported.

He listed that the firms in question were Aviva, Zurich, RSA, Allianz, Hiscox, Axa, Direct Line Group, Covea, Ageas, QBE, Ecclesiastical and Axa XL.

Evans had also suggested a meeting between the ABI and Glen’s officials to consider how any future one-off government grants relate to insurance.

“We … would be happy to engage constructively to help ensure any future uncertainty is minimised,” he had told Glen.

While the MP commended the named firms and welcomed the suggestion of a meeting, he also highlighted that the Financial Conduct Authority had written to insurers urging them to consider very carefully the appropriateness of any deductions.

Along with supporting the FCA, Glen warned: “If grant deductions continue to be made, the government will consider further action to protect the financial support being issued to businesses.”

An ABI spokesperson said of the communications: “This was a voluntary initiative by the ABI after individual consultation with major insurers. The vast majority of market is committed to an approach to give added certainty and reassurance to business customers in what can be a confusing issue of government support.”