SA financial watchdog says insurers cannot use lockdown to reject claims
JOHANNESBURG – South Africa's Financial Sector Conduct Authority (FSCA) said it was concerned that some insurers were using the country's lockdown in response to Covid-19, to avoid paying business interruption claims.
It said the lockdown imposed from March 27 in a bid to slow down transmissions of the coronavirus – which initially grounded most economic activity except for essential services – could not be used by insurers as grounds to reject claims.
"Such conduct goes against the principles of treating customers fairly and breaks down confidence and trust in the insurance sector. The FSCA has communicated this view to insurers and will take action against those that do not treat their customers fairly," the agency said in a statement dated Thursday.
It said it had formalised its concern in the form of a notice focusing on specific aspects of business interruption (BI) insurance cover following complaints about delays experienced by policyholders in the processing of claims and repudiations of claims by some insurers.
If a policyholder had a BI policy with a radius clause and could prove that they suffered a loss of business as a result of contagious or infectious disease in the area specified and their business was interrupted as a result of measures taken including the lockdown, then the policyholder had a valid claim, the FSCA said.
"In this regard, the FSCA has continuously reminded the insurance industry of the fact that Covid-19 entered the country and spread already prior to the declaration of the national lockdown," it added.
Insurance Claims Africa, a specialist public loss adjustment company representing over 500 businesses in the tourism and hospitality sector in their battle to get large insurers to pay out on Covid-19 BI insurance claims, welcomed the FSCA pronouncement.
“This is a massive step in the right direction, and we applaud the FSCA for its brave and clear guidance and proactive approach to this important matter," chief executive officer Ryan Woolley said.
He said insurers had been rejecting BI claims -- even though policyholders had extensions that covered infectious/contagious notifiable diseases -- arguing that these policies were never meant to cover pandemics and that the lockdown, rather than the Covid-19 pandemic itself, had caused the significant losses faced by the tourism and hospitality industry.
"FSCA’s statement unequivocally rules out this interpretation of these policies ... Insurers should not act contrary to their controlling authorities directives. To do so would increase the public's already poor impression of those insurers not paying these claims," Woolley added.
African News Agency (ANA)