Throughout the test case, the FCA's priority has been to bring clarity to policyholders and insurers. With the Supreme Court judgment, the regulatory priority will be to ensure that payments are made as rapidly as possible.
In the attached press release Sheldon Mills (FCA Executive Director for Consumers and Competition), emphasises the extreme financial distress that many corporates find themselves in. An urgent injection of liquidity is required by many businesses if they are going to be able to participate in the economic recovery that we all hope will follow mass vaccination.
Insurers will be under immense regulatory pressure to make interim payments whilst they develop more sophisticated approaches to assessing the value of claims. Failure to make payment rapidly will, in many cases, give rise to further consequential damage such that it must also be in the insurers' interests to find solutions that allow them to make the payments that must be made.
Manual assessment of individual claims is not an option. Insurers will be looking for digital solutions that not only allow them to pay claims quickly, but also give policyholders and regulators confidence that such claims are being treated on a consistent and defensible basis.
The challenge reminds me of that which the banks faced in relation to PPI, in that situation regulatory pressure was brought to bear to require that claims be dealt with on a timely basis. The only solution for many of our clients was to automate: design and build calculators that could demonstrate the value of a claim and support in the processing of those claims.
Many insurers have invested in sophisticated digital solutions, often focused on customer analytics and channel flexibility. A digital response to help tackle the identification and settlement of claims is required - in the operational areas of the business - which will require flexibility as well as speed, consistency and defensibility.
Experience has shown that any deviations from published guidelines and internal policy (inadvertently or otherwise) can be extremely costly in terms of regulatory scrutiny, reputational damage, downstream litigation and loss of business. Digital techniques can be employed to great benefit to save operational costs, improve consistency of customer outcomes, speed up response times and directly mitigate compliance and consistency risk.
There are levels of complexity to cover in the judgment - this is not just Hiscox - and it will in exceptions cover broader business interruption cases where loss of profit may be clear but policy clauses are not. There will also be a high level of public scrutiny present which, when accompanied with high average claim values will likely act as great incentives for Complaint Management Companies who will be more than happy to exploit any weakness in delay and outcome.
Insurers need solutions - and fast - and should seek to use digital rather than manual diagnostic and resolution tools with an eye to considering future impacts as well as today's.